INCOME TAX ASSESSMENT ACT 1997 - SECT 104.500 Loss of pre - CGT status of membership interests in entity becoming subsidiary member: CGT event L1
INCOME TAX ASSESSMENT ACT 1997 - SECT 104.500
Loss of pre - CGT status of membership interests in entity becoming subsidiary member: CGT event L1(1) CGT event L1 happens if, under section 705 - 57 (including in its application in accordance with Subdivisions 705 - B to 705 - E), there is a reduction in the * tax cost setting amount of assets of an entity that becomes a * subsidiary member of a * consolidated group or a * MEC group.
(2) The time of the event is just after the entity becomes a * subsidiary member of the group.
(3) For the head company core purposes mentioned in subsection 701 - 1(2), the * head company makes a capital loss equal to the reduction .
(4) The amount of the capital loss that can be applied to reduce the head company's * capital gains for the first income year ending after the entity becomes a * subsidiary member of the group (the first income year ) cannot exceed 1 / 5 of the * capital loss .
(5) The amount of the * net capital loss from the first income year, to the extent the amount is attributable to the * capital loss (the extent being the event L1 attributable loss ), that can be applied to reduce the head company's * capital gains for a later income year cannot exceed the amount worked out for the year using the following table:
Limit on applying event L1 attributable loss | ||
Item | For this income year: | The amount of the event L1 attributable loss that can be applied cannot exceed: |
1 | For the second income year ending after the entity became a * subsidiary member | The difference between: (a) 2/5 of the * capital loss; and (b) the amount of the capital loss that was applied in accordance with subsection (4) for the first income year. |
2 | For the third income year ending after the entity became a * subsidiary member | The difference between: (a) 3/5 of the * capital loss; and (b) the sum of the amount mentioned in paragraph (b) of item 1 and the amount of the event L1 attributable loss that was applied to reduce the entity's * capital gains for the next income year after the first income year. |
3 | For the fourth income year ending after the entity became a * subsidiary member | The difference between: (a) 4/5 of the * capital loss; and (b) the sum of the amount mentioned in paragraph (b) of item 1 and the amounts of the event L1 attributable loss that were applied to reduce the entity's * capital gains for earlier income years ending after the first income year. |
4 | For the fifth income year ending after the entity became a * subsidiary member, or for any later income year | The difference between: (a) the * capital loss; and (b) the sum of the amount mentioned in paragraph (b) of item 1 and the amounts of the event L1 attributable loss that were applied to reduce the entity's * capital gains for earlier income years ending after the first income year. |