INCOME TAX ASSESSMENT ACT 1997 - SECT 715.255 Consequences if leaving entity is a loss company at the leaving time

INCOME TAX ASSESSMENT ACT 1997 - SECT 715.255

  (1)   If:

  (a)   section   715 - 245 or 715 - 250 applies; and

  (b)   the leaving entity is a * loss company at the leaving time; and

  (ba)   the * head company has a relevant equity interest under section   165 - 115X in the leaving entity at the leaving time;

the head company must choose whether subsection   (2) or (3) of this section has effect for the purposes of applying, to each * membership interest in the leaving entity, in relation to the time just before the leaving time, whichever of these provisions is appropriate:

  (c)   subsection   701 - 55(3) (about trading stock);

  (d)   subsection   701 - 55(5), but only so far as it relates to working out the * reduced cost base of a * membership interest that was * acquired on or after 20   September 1985;

  (e)   subsection   701 - 55(6) (about revenue assets).

Note:   Section   701 - 55 is about setting the tax cost of an asset.

  (1A)   For the purposes of paragraph   (1)(ba), in determining whether the * head company has the relevant equity interest, disregard the operation of subsection   701 - 1(1) (the single entity rule) in applying subsections   165 - 115X(2C) and 165 - 115X(4).

  (2)   If the * head company chooses this subsection, the interest's * tax cost setting amount (apart from this section) just before the leaving time is reduced to nil.

  (3)   If the * head company chooses this subsection, the interest's * tax cost setting amount (apart from this section) just before the leaving time is reduced by the adjustment amount under section   165 - 115ZB, which is calculated on the basis that:

  (a)   just before the leaving time, all the * membership interests in the leaving entity constituted a single relevant equity interest under section   165 - 115X that the head company had in the leaving entity; and

  (b)   the adjustment amount is worked out and applied in accordance with subsection   165 - 115ZB(6), but disregarding the paragraphs of that subsection except paragraphs 165 - 115ZB(6)(a) and (d).

  (4)   The * head company's choice must be made within 6 months after the leaving time, or within a further period allowed by the Commissioner.

  (5)   After that 6 months, or that further period, the head company is taken to have chosen subsection   (2) unless it is established that the head company made a different choice within that 6 months or further period.

Non - membership equity interests

  (6)   Subsection   711 - 15(2) (which treats * non - membership equity interests as * membership interests) also applies for the purposes of this section, on the basis that the * consolidated group referred to in section   715 - 240 is the old group referred to in that subsection.