Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) For the purposes of step 3 in the table in section 705‑60, the step 3 amount is the sum of all fully franked dividends (within the meaning of subsection 46FA(11) of the Income Tax Assessment Act 1936 ) that the entity that is the * head company at the joining time would have received, on the assumptions in subsection (2) of this section, in respect of * membership interests that it held continuously until that time either directly or indirectly through interposed entities.
Assumptions
(2) The assumptions are that:
(a) the undistributed profits of the joining entity at the joining time, other than excluded profits (see subsection (3)), had been distributed as dividends to holders of * membership interests as those profits were earned; and
(b) the dividends were franked in accordance with section 160AQF of the Income Tax Assessment Act 1936 to the extent they could be assuming any income tax that would become payable on those profits was paid as those profits were earned; and
(c) entities interposed between the * head company and the joining entity successively distributed any of the fully franked dividends immediately after receiving them.
Excluded profits
(3) The excluded profits are those that recouped losses of any * sort that accrued to the joined group before the joining time.
Loss accruing to the joined group before the joining time
(4) A loss accrued to the joined group before the joining time if and to the extent that, assuming that as it arose it were instead a profit that was being earned, a distribution of that profit would have been a distribution made to the joined group out of profits that accrued to the joined group before the joining time.
Profit accruing to the joined group before the joining time
(5) A profit accrued to the joined group before the joining time if, on the following assumptions:
(a) that it was distributed to holders of * membership interests as it was earned; and
(b) that entities interposed between the * head company and the joining entity successively distributed any of it immediately after receiving it;
it would have been received by the entity that is the head company at the joining time, in respect of membership interests that it held continuously until that time either directly or indirectly through interposed entities.
Use of reliable estimates
(6) In working out:
(a) for the purposes of subsection (2) the amount of income tax that would become payable on the undistributed profits in respect of a particular period; or
(b) for the purposes of subsection (4) the amount of a loss that accrued to the joined group during a particular period; or
(c) for the purposes of subsection (5) the amount of a profit that accrued to the joined group during a particular period;
use the most reliable basis for estimation that is available.