TAX LAWS AMENDMENT (2010 MEASURES NO. 1) ACT 2010 (NO. 56, 2010) - SCHEDULE 5 Consolidation

TAX LAWS AMENDMENT (2010 MEASURES NO. 1) ACT 2010 (NO. 56, 2010) - SCHEDULE 5

Consolidation

Part 1 -- Use of the tax cost setting amount

Income Tax Assessment Act 1997

1 Section 12‑5 (table item headed "financial arrangements" (first occurring))

Repeal the item, substitute:

consolidated groups and MEC groups
assets in relation to Division 230 financial arrangement ...	701‑61(4)
rights to future income ............................................................	716‑405

2 Subsection 701‑55(3)

After "Division 70", insert "(other than Subdivision 70‑E)".

3 Subsection 701‑55(6)

Repeal the subsection, substitute:

Rights to future amounts to be included in assessable income of head company

(5C) If section 716‑410 (rights to future amounts that are expected to be included in assessable income) covers the asset at the particular time, the expression means that section 716‑405 may apply in relation to the asset after the particular time.

Other provisions

(6) If any provision of this Act that is not mentioned above is to apply in relation to the asset by including an amount in assessable income, or by allowing an amount as a deduction, in a way that brings into account (directly or indirectly) any of the following amounts:

(a) the cost of the asset;

(b) outgoings incurred, or amounts paid, in respect of the asset;

(d) an amount of a similar kind in respect of the asset;

the expression means that the provision applies, for the purpose of determining the amount included in assessable income or the amount of the deduction, as if the cost, outgoing, expenditure or other amount had been incurred or paid to acquire the asset at the particular time for an amount equal to its tax cost setting amount.

Note 1: This subsection modifies the application of the provision only for the purpose of determining the amount included in assessable income or the amount of the deduction. Therefore:

(a) the acquisition mentioned in this subsection is recognised only for that purpose; and

(b) apart from the things mentioned in subsection 701‑56(1), that acquisition does not affect the operation of section 701‑5 (the entry history rule) in relation to the asset for other purposes.

Note 2: For specific clarifications of the operation of this subsection in relation to bad debts, see Subdivision 716‑S.

701‑56 Setting the tax cost of an asset--subsection 701‑55(6)

Entry history rule

(1) To avoid doubt, if subsection 701‑55(6) applies in relation to an asset at the time (the joining time ) an entity (the joining entity ) became a * subsidiary member of a * consolidated group, the things that are taken to have happened in relation to the * head company of the group under section 701‑5 (entry history rule) do not include:

(a) the cost, outgoing, expenditure or other amount incurred or paid to acquire the asset by the joining entity; and

(b) whether the cost, outgoing, expenditure or other amount incurred or paid by the joining entity to acquire the asset has been deducted by the joining entity before the joining time.

Trading stock

(2) Subsection 701‑55(6) does not apply in relation to an asset if it is * trading stock.

Certain depreciating assets etc.

(3) Subsection 701‑55(6) does not apply in relation to an asset if any of the following provisions are to apply in relation to the asset:

(a) Subdivision 40‑F (Primary production depreciating assets);

(b) Subdivision 40‑G (Capital expenditure of primary producers and other landholders);

(d) Subdivision 40‑I (Capital expenditure that is deductible over time), other than section 40‑880 (Business related costs);

(e) Subdivision 40‑J (Capital expenditure for the establishment of trees in carbon sink forests);

(f) Division 41 (Additional deduction for certain new business investment);

(g) Division 43 (Deductions for capital works).

3A Subsection 701‑58(2)

After "(5A)", insert ", (5C)".

3B At the end of Division 701

Add:

701‑90 Valuable right to future income treated as separate asset

(1) This subsection covers a valuable right (including a contingent right) to receive an amount for the performance of work or services or the provision of goods (other than * trading stock) if:

(a) the valuable right forms part of a contract or agreement; and

(b) the * market value of the valuable right (taking into account all the obligations and conditions relating to the right) is greater than nil.

(2) For the purposes of this Part, treat a valuable right covered by subsection (1) as a separate asset.

(3) For the purposes of this Part, if:

(a) a valuable right is treated as a separate asset under subsection (2); and

(b) the contract or agreement mentioned in paragraph (1)(a) also includes one or more other rights;

for the purposes of this Part, treat the contract or agreement (excluding the valuable right) as a separate asset.

(4) For the purposes of this Part:

(a) take into account all the obligations and conditions relating to a valuable right treated as a separate asset under subsection (2) in working out the * market value of that separate asset; and

(b) if a contract or agreement (excluding the valuable right) is treated as a separate asset under subsection (3)--take into account all the obligations and conditions relating to each right (other than the valuable right) that forms part of the contract or agreement in working out the market value of that separate asset.

4 After Subdivision 716‑G

Insert:

Subdivision 716‑S -- Miscellenous consequences of tax cost setting

Table of sections

716‑400 Tax cost setting and bad debts

716‑405 Tax cost setting and rights to future income--deduction

716‑410 Rights to amounts that are expected to be included in assessable income after joining time

716‑400 Tax cost setting and bad debts

(1) The object of this section is to clarify the effect of section 701‑5 (entry history rule) and subsection 701‑55(6) in relation to an asset that may give rise to a bad debt. It achieves this object by clarifying that certain things are taken to have happened in relation to the asset through the operation of section 701‑5 and subsection 701‑55(6).

(2) This section applies if:

(a) the tax cost of an asset was set at the time (the joining time ) an entity (the joining entity ) became a subsidiary member of a * consolidated group at the asset's tax cost setting amount; and

(b) the asset is a debt; and

(i) the debt was included in the joining entity's assessable income before the joining time;

(ii) the debt was in respect of money that the joining entity lent before the joining time in the ordinary course of a business of lending money;

(iii) the joining entity bought the debt before the joining time in the ordinary course of a business of lending money; and

(d) the requirements in subsection 701‑58(1) (intra‑group assets) are not satisfied in relation to the asset.

(3) To avoid doubt, in determining the extent to which the * head company of the group can deduct an amount under section 25‑35 (bad debts) in relation to the asset, section 701‑5 (entry history rule) and subsection 701‑55(6) have the effect that, before the joining time:

(a) in a case covered by subparagraph (2)(c)(i)--the head company included an amount equal to the tax cost setting amount in its assessable income in respect of the debt; or

(b) in a case covered by subparagraph (2)(c)(ii)--the head company lent an amount of money in respect of the debt equal to the tax cost setting amount in the ordinary course of a business of lending money; or

(c) in a case covered by subparagraph (2)(c)(iii)--the head company incurred expenditure equal to the tax cost setting amount in buying the debt in the ordinary course of a business of lending money.

716‑405 Tax cost setting and rights to future income--deduction

(1) This section applies if:

(a) an entity (the joining entity ) became a subsidiary member of a * consolidated group at a time (the joining time ); and

(b) subsection 701‑55(5C) applies in relation to the asset at the joining time.

Note: Subsection 701‑55(5C) deals with assets covered by section 716‑410 (Rights to amounts that are expected to be included in assessable income after joining time).

(2) An entity qualified for a deduction under subsection (5) for the asset for an income year ending after the joining time can deduct, for that income year:

(a) unless paragraph (b) applies--the amount determined under subsection (3A); or

(b) if it is reasonable to expect that no amount will be included in the assessable income of an entity qualified for a deduction under subsection (5) for the asset for any later income year--the unexpended tax cost setting amount for the asset for that income year.

(3) Paragraph (2)(b) does not apply in relation to an entity qualified for a deduction under subsection (5) for the asset for that income year if:

(a) the entity is the * head company of the group; and

(b) another entity ceased to be a * subsidiary member of the group in that income year; and

(c) the other entity can deduct an amount under subsection (2) for that income year because it is also qualified for a deduction under subsection (5) for the asset for that income year.

(3A) For the purposes of paragraph (2)(a), the amount is the lesser of the following:

(a) the * unexpended tax cost setting amount for the asset for that income year;

(b) the unexpended tax cost setting amount for the asset for the first income year ending after the joining time, divided by the lesser of:

(i) 10; or

(ii) if the contract or agreement giving rise to the valuable right mentioned in paragraph 716‑410(a) is for a specified period--the number of days in that period that end after the joining time, divided by 365 and rounded upwards to the nearest whole number.

(4) The unexpended tax cost setting amount for the asset for an income year is the * tax cost setting amount for the asset, reduced by:

(a) the amounts (if any) of all deductions under this section in respect of the asset for previous income years ending after the joining time; and

(b) in determining the amount of a deduction under this section in respect of the asset for that income year for an entity that ceased to be a * subsidiary member of the group in that income year--the amount (if any) that the * head company of the group can deduct under this section in respect of the asset for that income year.

(5) An entity is qualified for a deduction under this subsection for an income year for the asset if:

(a) the entity:

(i) is the * head company of the group; and

(ii) held the asset at a time in that income year (whether or not because of the operation of subsection 701‑1(1) (the single entity rule)); or

(b) the entity:

(i) held the asset at a time in that income year; and

(ii) ceased to be a * subsidiary member of the group in that income year or an earlier income year.

(6) An amount deducted under this section:

(a) is not to be deducted under any other provision of this Act; and

(b) is not to be taken into account in determining an amount that is included in the assessable income of any entity qualified for a deduction under subsection (5) for any income year for the asset ; and

(c) is not to be taken into account in determining an amount of a deduction of any entity qualified for a deduction under subsection (5) for any income year for the asset; and

(d) despite paragraphs (b) and (c), is taken never to have been included in any of the elements of the * cost base of the asset.

716‑410 Rights to amounts that are expected to be included in assessable income after joining time

This section covers an asset at a time if:

(a) the asset is a valuable right covered by subsection 701‑90(1); and

Note: Such a valuable right is treated as a separate asset for the purposes of this Part (see subsection 701‑90(2)).

(b) the asset is held by an entity just before the time (the joining time ) it became a * subsidiary member of a * consolidated group; and

(c) it is reasonable to expect that an amount attributable to the asset will be included in the assessable income of the entity or any other entity after the joining time; and

(d) Division 230 does not apply in relation to the asset (disregarding section 230‑455).

5 Subsection 995‑1(1)

Insert:

"unexpended tax cost setting amount" has the meaning given by section 716-405.

Division 2--Foreign currency gains and losses

Income Tax Assessment Act 1997

6 After Subdivision 715‑D

Insert:

Subdivision 715‑E -- Interactions with Division 775 (Foreign currency gains and losses)

Table of sections

715‑370 Cost setting--reference time for determining currency exchange rate effect

(1) This section applies if:

(a) an entity (the joining entity ) becomes a * subsidiary member of a * consolidated group at a time (the joining time ); and

(b) taking into account the operation of subsection 701‑1(1) (the single entity rule), the * head company of the group held an asset at the joining time because the joining entity became a subsidiary member of the group; and

(d) in working out the asset's * tax cost setting amount, the currency exchange rate of a particular * foreign currency is taken into account in determining the * market value of the asset.

(2) For the purposes of Division 775, determine the extent of any * currency exchange rate effect after the joining time in relation to the asset, by reference to the currency exchange rate for the * foreign currency at the joining time.

Division 3--Application and transitional provisions

7 Application provision

(1) The amendments made by Division 1 of this Part apply on and after 1 July 2002.

(2) The amendment made by Division 2 of this Part applies in relation to a consolidated group or MEC group on and after:

(a) if the head company of the group makes a choice in accordance with subitems (3) and (4)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act was introduced into the House of Representatives.

(3) A choice mentioned in paragraph (2)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(4) A choice mentioned in paragraph (2)(a) must be made in writing.

8 Transitional provision--use of the tax cost setting amount

(1) This item applies if:

(a) the tax cost of an asset was set at the time (the joining time ) an entity (the joining entity ) became a subsidiary member of a consolidated group or MEC group, at the asset's tax cost setting amount; and

(b) the asset is a trade receivable that is denominated in foreign currency; and

(i) after the joining time; and

(ii) before 23 August 2006; and

(d) just before the CGT event, the head company of the group held the asset because of the operation of subsection 701 ‑1(1) of the Income Tax Assessment Act 1997 (the single entity rule); and

(e) disregarding section 118‑20 of that Act, there is a capital gain or capital loss from the event; and

(f) the head company of the group makes a choice to apply this item, in accordance with subitems (4) and (5).

(2) These provisions do not apply to the CGT event:

(a) section 6‑5 of the Income Tax Assessment Act 1997 (about ordinary income);

(b) any other provision of that Act that includes an amount in assessable income, other than a provision in Part 3‑1 or 3‑3 of that Act;

(d) any other provision of that Act that allows you to deduct an amount from your assessable income;

(e) section 118‑20 of that Act.

(3) The provisions referred to in subitem (2) can apply to the CGT event to the extent that any capital gain or capital loss from the event is attributable to currency exchange rate fluctuations.

(4) A choice mentioned in paragraph (1)(f) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(5) The way the head company prepares its income tax return is sufficient evidence of the making of the choice.

Part 2 -- Group restructures

Income Tax Assessment Act 1997

9 Paragraph 703‑75(2)(d)

Omit "group);", substitute "group); or".

10 After paragraph 703‑75(2)(d)

Insert:

(e) section 719‑125 (about the effects of a group conversion involving a MEC group);

11 Section 719‑25 (heading)

Repeal the heading, substitute:

719‑25 Head company, subsidiary members and members of a MEC group

12 At the end of section 719‑25

Add:

(3) The members of a * MEC group are the * head company of the group and the * subsidiary members of the group.

13 Subparagraph 719‑65(3)(d)(i)

Omit "the group came into existence as a result of a choice under section 719‑50, and".

14 After paragraph 719‑90(2)(c)

Insert:

(ca) section 719‑125 (about the effects of a group conversion involving a MEC group); or

15 After Subdivision 719‑B

Insert:

Subdivision 719‑BA -- Group conversions involving MEC groups

Table of sections

719‑120 Application

719‑125 Head company of new group retains history of head company of old group

719‑130 Provisions of this Part not to apply to conversion

719‑135 Provisions of this Part applying to conversion despite section 719‑130

719‑140 Other provisions of this Part not applying to conversion

719‑120 Application

(1) This Subdivision applies if, at a particular time (the conversion time ):

(a) a * consolidated group (the new group ) is * created from a * MEC group (the old group ); or

(b) a MEC group (the new group ) is created from a consolidated group (the old group ).

(2) However, sections 719‑130 and 719‑135 apply only in relation to entities that:

(a) were * members of the old group just before the conversion time; and

(b) are members of the new group at that time.

719‑125 Head company of new group retains history of head company of old group

(1) Everything that happened in relation to the * head company of the old group before the conversion time is taken instead to have happened in relation to:

(a) if the head company of the old group is the same entity as the head company of the new group--that entity in its role as head company of the new group; or

(b) otherwise--the head company of the new group (just as if the head company of the new group had been the head company of the old group at all times before the conversion time).

(2) To avoid doubt, subsection (1) also covers everything that, immediately before the conversion time, was taken to have happened in relation to the * head company of the old group because of:

(a) section 701‑1 (the single entity rule); or

(b) section 701‑5 (the entry history rule); or

(c) section 703‑75 (about the effects of choice to continue * consolidated group after shelf company becomes new head company); or

(d) section 719‑90 (about the effects of a change of head company of a * MEC group); or

(e) one or more previous applications of this Division.

(3) Subsections (1) and (2) have effect:

(a) for the * head company core purposes in relation to an income year ending after the conversion time; and

(b) for the entity core purposes in relation to an income year ending after the conversion time; and

(c) for the purposes of determining the balance of the * franking account of the head company of the new group at and after the conversion time.

(4) Subsections (1) and (2) have effect subject to:

(a) section 701‑40 (Exit history rule); and

(b) a provision of this Act to which section 701‑40 is subject because of section 701‑85 (about exceptions to the core rules in Division 701).

Note: An example of provisions covered by paragraph (b) of this subsection is Subdivision 717‑E (about transferring to a company leaving a consolidated group various surpluses under the CFC rules in Part X of the Income Tax Assessment Act 1936 ).

719‑130 Provisions of this Part not to apply to conversion

(1) A provision mentioned in subsection (5) that applies on an entity becoming a * member of a * consolidated group or * MEC group does not apply to an entity becoming such a member because of a situation described in subsection 719‑120(1), unless the provision is expressed to apply despite this subsection.

Note 1: An example of the effect of this subsection is that section 701‑5 (entry history rule) does not apply. See instead section 719‑125.

Note 2: Further examples of the effect of this subsection are that Division 705 (cost setting on entry) and Division 707 (losses) do not apply.

(2) Subsection (1) does not affect the application of subsection 701‑1(1) (the single entity rule).

(3) A provision mentioned in subsection (5) that applies on an entity ceasing to be a * member of a * consolidated group or * MEC group does not apply to an entity ceasing being such a member because of a situation described in subsection 719‑120(1), unless the provision is expressed to apply despite this subsection.

Note 1: An example of the effect of this subsection is that section 701‑40 (Exit history rule) does not apply. See instead section 719‑125.

Note 2: Another example of the effect of this subsection is that Division 711 (cost setting on exit) does not apply.

(4) Subsection (3) does not apply if:

(a) the old group mentioned in subsection 719‑120(1) is a * consolidated group; and

(b) the new group mentioned in subsection 719‑120(1) is a * MEC group; and

(c) the entity ceasing to be a * member of the old group becomes an * eligible tier‑1 company in respect of the new group.

(5) The provisions are as follows:

(a) Subdivision 104‑L;

(b) section 165‑212E;

(d) Part 3‑90 of the Income Tax (Transitional Provisions) Act 1997 .

719‑135 Provisions of this Part applying to conversion despite section 719‑130

(1) This section applies despite subsections 719‑130(1) and (3).

(2) If the new group is a * consolidated group, the following provisions may apply on an entity ceasing to be a * member of the old group:

(a) Subdivision 719‑K;

(b) any other provision of this Part, to the extent that the application of the provision is necessary for the application of Subdivision 719‑K.

719‑140 Other provisions of this Part not applying to conversion

If the new group is a * consolidated group, the following provisions do not apply merely because the old group ceases to exist at the conversion time (or merely because the * potential MEC group of which the old group consisted ceases to exist at that time):

(a) section 719‑280;

(b) section 719‑465;

(d) section 719‑725;

(e) any other provision of this Part, to the extent that the application of the provision is necessary for the application of any of those sections.

16 Subsection 995‑1(1) (after paragraph (b) of the definition of member )

Insert:

(ba) in relation to a * MEC group--has the meaning given by section 719‑25; and

(bb) in relation to a * potential MEC group--has the meaning given by section 719‑10; and

17 Application provision

(1) The amendments made by this Part apply in relation to the creation of a MEC group from a consolidated group, or a consolidated group from a MEC group, on or after:

(a) if the head company of the group makes a choice in accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--27 October 2006.

(2) A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3) A choice mentioned in paragraph (1)(a) must be made in writing.

(4) Despite subitem (1), the amendment made by item 13 of this Schedule applies on and after 1 July 2002.

Part 3 -- Pre‑CGT proportions

Income Tax Assessment Act 1997

18 Section 705‑125 (heading)

Repeal the heading, substitute:

705‑125 Pre‑CGT proportion for joining entity

19 Subsection 705‑125(1)

Omit "That mechanism involves working out a factor by which the pre‑CGT status can be attached to the joining entity's assets and then recognised in membership interests held in an entity that owns the assets on ceasing to be a * subsidiary member of the joined group.", substitute "That mechanism involves:

(a) working out the proportion (measured by market value) of the membership interests in the joining entity that have pre‑CGT status; and

(b) if the joining entity later ceases being a member of the group, attaching pre‑CGT status to that proportion of membership interests in it (see section 711‑65), subject to integrity rules (see section 711‑70).".

20 Subsections 705‑125(2) and (3)

Repeal the subsections, substitute:

How to work out pre‑CGT proportion

(2) The pre‑CGT proportion is the amount worked out by dividing:

(a) the sum of the * market value of each * membership interest in the joining entity that is:

(i) held by a * member of the group at the joining time; and

(ii) is a * pre‑CGT asset;

by:

(b) the sum of the market value of each membership interest in the joining entity that is held by a member of the group at the joining time.

21 Subsection 705‑125(4)

Omit "paragraph (3)(a)", substitute "subsection (2)".

22 Section 705‑165

Repeal the section.

23 Section 705‑205

Repeal the section.

24 Section 705‑245

Repeal the section.

25 Section 711‑65 (heading)

Repeal the heading, substitute:

711‑65 Membership interests treated as having been acquired before 20 September 1985

26 Subsection 711‑65(1)

Repeal the subsection, substitute:

When this section applies

(1) This section applies unless:

(a) Subdivision 705‑C (about one group joining another consolidated group) applies in relation to the old group; and

(b) the leaving entity is a * subsidiary member of the old group.

(1A) To avoid doubt, this section applies regardless of whether the leaving entity ceases to be a * subsidiary member of the old group at the leaving time because another entity also ceases to be a subsidiary member of the old group at the leaving time.

27 Subsection 711‑65(2) (note)

Repeal the note.

28 Subsection 711‑65(4) (definition of leaving entity's pre‑CGT proportion )

Omit "subsection (5)", substitute "section 705‑125".

29 Subsection 711‑65(5)

Repeal the subsection.

30 Section 711‑70

Repeal the section, substitute:

711‑70 Additional integrity rule if membership interests treated as having been acquired before 20 September 1985 under section 711‑65--application of Division 149 to head company

(1) This section applies if:

(a) the leaving entity held assets at the time it became a * subsidiary member of the old group (disregarding subsection 701‑1(1) (the single entity rule)); and

(b) some or all of the assets:

(i) stopped being * pre‑CGT assets under Division 149 at a time (the Division 149 time ) when the * head company of the group held them under subsection 701‑1(1) (the single entity rule); or

(ii) would have stopped being pre‑CGT assets under Division 149 at a time (also the Division 149 time ) when the head company of the group held them under subsection 701‑1(1) (the single entity rule) if they had been pre‑CGT assets just before that time; and

(2) The * pre‑CGT proportion of the leaving entity at the leaving time is taken to be nil.

(3) Adjust the old group's * allocable cost amount for the leaving entity as follows:

(a) if the amount under subsection (4) exceeds the amount under subsection (6)--increase the allocable cost amount by the excess;

(b) if the amount under subsection (4) falls short of the amount under subsection (6)--reduce the allocable cost amount by the shortfall.

(4) Subject to subsection (5), the amount under this subsection is:

(a) if Subdivision 705‑A applied in relation to the leaving entity at the time it became a * subsidiary member of the old group--the total of the amounts that were taken into account under subsection 705‑65(1) for * membership interests in the leaving entity at that time; or

(b) otherwise--assuming that Subdivision 705‑A had applied in relation to the leaving entity at the time it became a subsidiary member of the old group, the total of the amounts that would have been taken into account under subsection 705‑65(1) for membership interests in the leaving entity at that time.

(5) For the purposes of subsection (4), if a * membership interest in the leaving entity was covered under paragraph 705‑125(2)(a) (pre‑CGT interests) when it became a * subsidiary member of the old group, treat the amount that was taken into account for the membership interest under subsection 705‑65(1) as the interest's * market value just after the Division 149 time.

(6) The amount under this subsection is the old group's * allocable cost amount for the leaving entity, worked out on the assumption that the leaving entity ceased to be a * subsidiary member of the old group just after the Division 149 time.

711‑75 Additional integrity rule if membership interests treated as having been acquired before 20 September 1985 under section 711‑65--application of CGT event K6

(1) This section applies if the leaving entity ceases to be a * subsidiary member of the old group because of a situation giving rise to * CGT event A1, C2, E1, E2 or E8 in relation to one or more * membership interests in the leaving entity.

(2) For the purposes of applying subsections 104‑230(2) and (8) in relation to those * membership interests:

(a) disregard subsection 701‑1(1) (the single entity rule) in working out the * net value of the leaving entity; and

(b) treat the reference in subsection 104‑230(2) to "Just before the other event happened" as a reference to "Just before the leaving time".

Note 1: The single entity rule will continue to apply in determining whether the property mentioned in subsection 104‑230(2) for the leaving entity was acquired on or after 20 September 1985.

Note 2: However, in a case of multiple exit from a consolidated group (see section 711‑55), the property mentioned in subsection 104‑230(2) for the leaving entity may include membership interests in another entity leaving the group at the leaving time. To determine which of those membership interests were acquired on or after 20 September 1985 for the purposes of applying subsection 104‑230(2) to the leaving entity, see section 711‑65.

(3) In determining the sum of the * cost bases of the property mentioned in subsection 104‑230(6), treat the cost base of an asset that is included in that property as:

(a) if the asset has its * tax cost set at the leaving time under section 701‑50--its * tax cost setting amount; or

(b) if the * terminating value of the asset is taken into account in working out the step 1 amount under section 711‑25 for the leaving entity--that terminating value; or

(c) if the asset is taken into account in working out the step 3 amount under section 711‑40 for the leaving entity--the value of the asset that is so taken into account.

31 Section 713‑245

Repeal the section.

32 Section 713‑270

Repeal the section.

33 Subsection 995‑1(1) (definition of pre‑CGT factor )

Repeal the definition.

34 Subsection 995‑1(1)

Insert:

"pre-CGT proportion" has the meaning given by section 705-125.

35 Application provision

(1) The amendments made by this Part apply in relation to an entity that becomes a subsidiary member of a consolidated group or MEC group on or after:

(a) if the head company of the group makes a choice in accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act was introduced into the House of Representatives.

(2) A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3) A choice mentioned in paragraph (1)(a) must be made in writing.

Part 4 -- No double counting of amounts in ACA

Income Tax Assessment Act 1997

36 After section 705‑60

Insert:

705‑62 No double counting of amounts in allocable cost amount

(1) The object of this section is to prevent a particular amount from being taken into account more than once in calculating the * allocable cost amount for the joining entity, in order to promote the object of this Subdivision set out in section 705‑10.

(2) Subsection (3) applies if, apart from this section, 2 or more provisions of this Act operate with the result of altering:

(a) the * allocable cost amount for the joining entity; or

(b) the allocable cost amount for another entity that becomes a * subsidiary member of the group at the joining time;

because of a particular economic attribute of the joining entity (see subsection (6)).

(3) Only one of those alterations is to be made, as follows:

(a) if the * head company of the group makes a choice in accordance with subsections (4) and (5)--the alteration specified in the choice is to be made;

(b) otherwise--the alteration that is most appropriate (in the light of the object of this Subdivision) is to be made.

(4) A choice mentioned in paragraph (3)(a) must be made:

(a) by the day the * head company of the group lodges its * income tax return for the income year in which the joining time occurs; or

(b) within a further time allowed by the Commissioner.

(5) A choice mentioned in paragraph (3)(a) must be made in writing.

(6) The economic attributes of the joining entity mentioned in subsection (2) include the following:

(a) the joining entity's retained profits;

(b) the joining entity's distributions of profits to other entities;

(d) the joining entity's deductions;

(e) the joining entity's accounting liabilities (within the meaning of subsection 705‑70(1));

(f) consideration received by the joining entity for issuing * membership interests in itself.

37 Application provision

(1) The amendment made by this Part applies in relation to a consolidated group or MEC group on and after:

(a) if the head company of the group makes a choice in accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act was introduced into the House of Representatives.

(2) A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3) A choice mentioned in paragraph (1)(a) must be made in writing.

38 Transitional provision--choice where pre‑commencement joining time

(1) This item applies if the joining time mentioned in paragraph 705‑62(4)(a) of the Income Tax Assessment Act 1997 occurs before the day on which this item commences.

(2) Despite subsection 705‑62(4) of the Income Tax Assessment Act 1997 , the choice mentioned in that subsection must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

Part 5 -- Pre‑joining time roll‑overs

Income Tax Assessment Act 1997

39 Paragraph 104‑505(1)(b)

Omit "(after any application of section 705‑150)".

40 Section 705‑60 (table item 3A)

Repeal the item, substitute:

For each step 3A amount (if any) under section 705‑93 (which is about pre‑joining time roll‑overs):

(a) if the step 3A amount is a * deferred roll‑over loss--add to the result of step 3 (as affected by any previous application of this step) the step 3A amount; or

(b) if the step 3A amount is a * deferred roll‑over gain--subtract from the result of step 3 (as affected by any previous application of this step) the step 3A amount

To adjust for certain roll‑overs before the joining time affecting deferred gains and losses

41 Section 705‑93 (heading)

Repeal the heading, substitute:

705‑93 If pre‑joining time roll‑over from foreign resident company or head company--step 3A in working out allocable cost amount

42 After paragraph 705‑93(1)(a)

Insert:

(aa) at the joining time, as a result of the Subdivision 126‑B roll‑over or the section 160ZZO roll‑over, the roll‑over asset has:

(i) a * deferred roll‑over gain; or

(ii) a * deferred roll‑over loss; and

43 Paragraph 705‑93(1)(b)

Repeal the paragraph, substitute:

(b) the originating company in relation to the Subdivision 126‑B roll‑over, or the transferor in relation to the section 160ZZO roll‑over:

(i) was a foreign resident; or

(ii) is the * head company in relation to the joined group; and

44 Paragraph 705‑93(1)(c)

Repeal the paragraph, substitute:

(c) the recipient company in relation to the Subdivision 126‑B roll‑over, or the transferee in relation to the section 160ZZO roll‑over:

(i) was an Australian resident; and

(ii) is a * spread entity in relation to the joined group; and

45 Paragraph 705‑93(1)(d)

Repeal the paragraph, substitute:

(d) if the recipient company was previously a * subsidiary member of another consolidated group--the conditions in section 104‑182 were not satisfied at any time in relation to the other group between the Subdivision 126‑B roll‑over, or the section 160ZZO roll‑over, and the joining time; and

46 Subsection 705‑93(2)

Repeal the subsection, substitute:

(2) The step 3A amount is the amount of the * deferred roll‑over gain or the * deferred roll‑over loss mentioned in paragraph (1)(aa).

47 Subsections 705‑147(3), (4) and (5)

Repeal the subsections, substitute:

Membership interests in subsidiary members of group

(3) In applying section 705‑93 for the purposes of this Subdivision, disregard paragraph 705‑93(1)(f) if:

(a) the rollover asset mentioned in that section is a * membership interest in an entity that becomes a * subsidiary member at the formation time; and

(b) the rollover asset is not held at that time by the entity that becomes the * head company of the group.

Note: The step 3A amount is worked out under section 705‑93.

48 Section 705‑150

Repeal the section.

49 Subsections 705‑227(3), (4) and (5)

Repeal the subsections, substitute:

Membership interests in subsidiary members of group

(3) In applying section 705‑93 for the purposes of this Subdivision, disregard paragraph 705‑93(1)(f) if:

(a) the rollover asset mentioned in that section is a * membership interest in an entity that becomes a * subsidiary member at the linked entity joining time; and

(b) the rollover asset is not held at that time by the entity that becomes the * head company of the group.

Note: The step 3A amount is worked out under section 705‑93.

50 Subsection 995‑1(1)

Insert:

"deferred roll-over gain" : an asset has a deferred roll-over gain at a particular time if:

(a) before that time there was a roll‑over under a provision or former provision of this Act in relation to a disposal or a * CGT event that happened in relation to the asset; and

(b) as a result of the roll‑over all or part of a * capital gain from the disposal or CGT event was disregarded.

The amount of the deferred roll‑over gain is equal to the amount of the capital gain that was disregarded, reduced by the amount (if any) by which the gain has been taken into account in working out a * net capital gain (section 102‑5) or * net capital loss (section 102‑10) in relation to the asset between the roll‑over time and the particular time.

51 Subsection 995‑1(1)

Insert:

"deferred roll-over loss" : an asset has a deferred roll-over loss at a particular time if:

(a) before that time there was a roll‑over under a provision or former provision of this Act in relation to a disposal or a * CGT event that happened in relation to the asset; and

(b) as a result of the roll‑over all or part of a * capital loss from the disposal or CGT event was disregarded.

The amount of the deferred roll‑over loss is equal to the amount of the capital loss that was disregarded, reduced by the amount (if any) by which the loss has been taken into account in working out a * net capital gain (section 102‑5) or * net capital loss (section 102‑10) in relation to the asset between the roll‑over time and the particular time.

52 Subsection 995‑1(1)

Insert:

"spread entity" , in relation to a * consolidated group or * MEC group, means a * member of the group that is not a * stick entity in relation to the group.

53 Subsection 995‑1(1)

Insert:

"stick entity" :

(a) in relation to a * consolidated group--means a * member of the group that is:

(i) the * head company of the group; or

(ii) a chosen transitional entity (within the meaning of Division 701 of the Income Tax (Transitional Provisions) Act 1997 ); or

(iii) a transitional foreign‑held subsidiary (within the meaning of Division 701C of the Income Tax (Transitional Provisions) Act 1997 ); or

(b) in relation to a * MEC group--means a member of the group that is:

(i) the head company of the group; or

(ii) a chosen transitional entity (within the meaning of Division 701 of the Income Tax (Transitional Provisions) Act 1997 ); or

(iii) a transitional foreign‑held subsidiary (within the meaning of Division 701C of the Income Tax (Transitional Provisions) Act 1997 ); or

(iv) an * eligible tier‑1 company.

Income Tax (Transitional Provisions) Act 1997

54 Section 126‑165 (paragraph (c) of the example)

Omit "section 705‑150", substitute "section 705‑93".

55 Application provision

The amendments made by this Part apply on and after 1 July 2002.

Part 6 -- Phasing out over‑depreciation adjustments

Division 1--Joining times between 8 May 2007 and 30 June 2009

Income Tax Assessment Act 1997

56 Paragraph 705‑50(2)(b)

Omit "before the joining time", substitute "during the period of 5 years ending at the joining time".

57 Application provision

The amendment made by this Division applies in relation to entities that become members of a consolidated group or MEC group during the period:

(a) starting on 9 May 2007; and

(b) ending on 30 June 2009.

Division 2--Repeal of section 705‑50 with effect from 1 July 2009

Income Tax Assessment Act 1997

58 Section 705‑50

Repeal the section.

59 Section 705‑55 (heading)

Repeal the heading, substitute:

705‑55 Order of application of sections 705‑40, 705‑45 and 705‑47

60 Subparagraph 705‑55(b)(iii)

Omit "705‑47;", substitute "705‑47.".

61 Subparagraph 705‑55(b)(iv)

Repeal the subparagraph.

62 Paragraph 705‑57(2)(d)

Omit "705‑45, 705‑47 or 705‑50", substitute "705‑45 or 705‑47".

63 Subsection 705‑57(6)

Omit "705‑45, 705‑47 or 705‑50", substitute "705‑45 or 705‑47".

64 Subsection 705‑59(7)

Omit "705‑45, 705‑47 and 705‑50", substitute "705‑45 and 705‑47".

65 Section 705‑190

Repeal the section.

66 Section 713‑225(5)

Repeal the subsection.

67 Section 713‑230

Repeal the section.

68 Subsection 715‑900(2) (note 2)

Repeal the note, substitute:

Note 2: The operation of Division 58 just before the joining time can affect the basis on which the tax cost is set for a depreciating asset that becomes an asset of the head company of the consolidated group at the joining time because of section 701‑1 (the single entity rule). That Division provides the basis for working out under Division 40 the asset's adjustable value. This is the entity's terminating value for the asset, which in turn can affect the tax cost setting amount for the asset under sections 705‑40, 705‑45 and 705‑47.

69 Subsection 716‑330(9)

Repeal the subsection.

70 Subsection 716‑340(8) (note)

Repeal the note, substitute:

Note: Subsections (6), (7) and (8) can affect the working out of the tax cost setting amount for the in‑house software, by affecting the joining entity's terminating value for the software, which section 705‑30 defines as being the adjustable value of the software just before the joining time, and which is relevant to sections 705‑40 and 705‑57 (which may reduce the tax cost setting amount for the software).

71 Subsection 995‑1(1) (definition of over‑depreciated )

Repeal the definition.

72 Subsection 995‑1(1) (definition of over‑depreciation )

Repeal the definition.

Income Tax (Transitional Provisions) Act 1997

73 Section 126‑165 (paragraph (b) of the example)

Repeal the paragraph.

74 Subsection 701‑40(1)

Omit "(5)", substitute "(4)".

75 Paragraph 701‑40(3)(b)

Omit "section 705‑50", substitute "former section 705‑50".

76 Subsection 701‑40(5)

Repeal the subsection.

77 Subsection 705‑305(9) (note)

Omit "sections 705‑40 and 705‑50", substitute "section 705‑40".

78 Application provision

The amendments made by this Division apply in relation to entities that become members of a consolidated group or MEC group on or after 1 July 2009.

Part 7 -- Leaving time liabilities

Division 1--Timing

Income Tax Assessment Act 1997

79 Subsection 711‑20(1) (cell at table item 1, column headed "What the step requires")

Omit "the * terminating values of assets that the leaving entity takes with it when it ceases to be a * subsidiary member", substitute "the * terminating values of the leaving entity's assets just before the leaving time".

80 Subsection 711‑20(1) (cell at table item 2, column headed "What the step requires")

Omit "the * terminating value of the assets that the leaving entity takes with it", substitute "the * terminating value of the leaving entity's assets just before the leaving time".

81 Subsection 711‑20(1) (cell at table item 4, column headed "What the step requires")

Omit:

(a) the liabilities that the leaving entity takes with it when it ceases to be a * subsidiary member; and

Substitute:

(a) the leaving entity's liabilities just before the leaving time; and

82 Section 711‑25 (heading)

Repeal the heading, substitute:

711‑25 Terminating values of the leaving entity's assets--step 1 in working out allocable cost amount

83 Subsection 711‑45(1)

Omit "is a liability of the leaving entity at the leaving time", substitute "is a liability of the leaving entity just before the leaving time".

84 Paragraph 713‑265(4)(a)

Omit "is a liability of the partnership at the leaving time", substitute "is a liability of the partnership just before the leaving time".

85 Paragraph 713‑265(4)(b)

Omit "of the partner at the leaving time", substitute "of the partner just before the leaving time".

86 Subsection 713‑265(4)

Omit "of the partner at the leaving time,", substitute "of the partner just before the leaving time,".

87 Application provision

(1) The amendments made by this Division apply on and after the day on which the Bill that became this Act was introduced into the House of Representatives.

(2) The amendments made by this Division are to be disregarded for the purposes of interpreting:

(a) the provisions amended by this Division, as they applied before the day mentioned in subitem (1); and

(b) any other provision of the Income Tax Assessment Act 1997 or the Income Tax (Transitional Provisions) Act 1997 , as that provision applied before the day mentioned in subitem (1), to the extent that it relates to a provision mentioned in paragraph (a).

Division 2--Adjustment of step 4 amount

Income Tax Assessment Act 1997

88 Subsection 711‑45(8)

Repeal the subsection, substitute:

Adjustment where amount of liability differed for purpose of calculating allocable cost amount on entry

(8) Subsection (10) applies if:

(a) either:

(i) an amount (the exit liability amount ) was added for a particular liability under subsection (5); or

(ii) a particular liability is covered by subsection (5), but no amount was added for it under that subsection (in which case the exit liability amount is zero); and

(b) the liability was taken into account in working out the * allocable cost amount (the original entry ACA ) for a * subsidiary member (whether or not the leaving entity) of the old group in accordance with Division 705; and

(c) the exit liability amount is not the same as the amount (the entry liability amount ) of the liability that was taken into account in working out the original entry ACA, after any adjustments made under:

(i) section 705‑70, 705‑75 or 705‑80; and

(ii) subsection (9) of this section; and

(d) if the liability is a provision for annual leave or long service leave, or a provision for a liability contingent on a future event:

(i) in the case of a liability that was, in accordance with the * accounting principles that the entity would have used if it had prepared its financial statements just before the time it became a subsidiary member of the group, a current liability of the entity at that time--the leaving time occurs less than 1 year after that time; or

(ii) otherwise--the leaving time occurs less than 4 years after that time.

(9) Make these adjustments to the entry liability amount if, at a time when the leaving entity was a * subsidiary member of the old group, the * head company of the group paid an amount that reduced the liability:

(a) reduce the entry liability amount by the amount of the reduction; and

(b) if the payment gave rise to an amount being included in the assessable income of the head company--after making the reduction in paragraph (a), further reduce the entry liability amount by the product of:

(i) the amount included in assessable income; and

(ii) the * corporate tax rate; and

(c) if the payment gave rise to a deduction for the head company--after making the reduction in paragraph (a), increase the entry liability amount by the product of:

(i) the amount deducted; and

(ii) the corporate tax rate.

(10) The step 4 amount is altered by:

(a) if the entry liability amount exceeds the exit liability amount--increasing the step 4 amount by the excess; or

(b) if the entry liability amount falls short of the exit liability amount--decreasing the step 4 amount by the shortfall.

89 Application provision

The amendment made by this Division applies in relation to an entity ceasing to be a subsidiary member of a consolidated group or MEC group on or after the day on which the Bill that became this Act was introduced into the House of Representatives.

Part 8 -- Accounting principles

Income Tax Assessment Act 1997

90 Paragraph 701‑40(2)(b)

Omit " * accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board", substitute " * accounting principles".

91 Paragraph 705‑56(1)(b)

Omit " * accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board", substitute "its * accounting principles for tax cost setting".

92 Subsection 705‑58(1)

Omit " * accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board, require them to be set off against each other", substitute ", in accordance with * accounting principles, they are required to be set off against each other".

93 Subsection 705‑59(2)

Omit " * accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board", substitute "the entity's * accounting principles for tax cost setting".

94 Subsection 705‑70(1)

Omit " * accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board", substitute "the joining entity's * accounting principles for tax cost setting".

95 Subsection 705‑70(1)

Omit "that can or must be recognised in the entity's statement of financial position".

96 Subsection 705‑70(1A)

Omit "those * accounting standards or statements", substitute "the * accounting principles".

97 At the end of section 705‑70

Add:

Joining entity's accounting principles for tax cost setting

(3) The joining entity's accounting principles for tax cost setting are the * accounting principles that the entity would use if it were to prepare its financial statements just before the joining time.

98 Paragraph 705‑80(1)(a)

Omit " * accounting standards or statements of accounting concepts made by the Australian Accounting Standards Board", substitute "the joining entity's * accounting principles for tax cost setting".

99 Paragraph 705‑85(3)(b)

Omit " * accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board", substitute "the joining entity's * accounting principles for tax cost setting".

100 Subsection 705‑90(2)

Omit " * accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board", substitute "the joining entity's * accounting principles for tax cost setting".

101 Subsection 705‑90(2)

Omit "that could be recognised in the joining entity's statement of financial position if that statement were prepared as at the joining time".

102 Subsection 711‑45(1)

Omit " * accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board", substitute "the leaving entity's * accounting principles for tax cost setting".

103 Subsection 711‑45(1)

Omit "that can or must be identified in the entity's statement of financial position".

104 After subsection 711‑45(1)

Insert:

Leaving entity's accounting principles for tax cost setting

(1A) The leaving entity's accounting principles for tax cost setting are the * accounting principles that the group would use if it were to prepare its financial statements just before the leaving time (disregarding subsection 701‑1(1) (the single entity rule)).

105 Subsection 711‑45(5)

Omit " * accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board", substitute "the leaving entity's * accounting principles for tax cost setting".

106 Subsection 711‑45(7)

Omit " * accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board", substitute "the leaving entity's * accounting principles for tax cost setting".

107 Paragraph 713‑225(6)(a)

Omit "according to * accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board", substitute "in accordance with the * accounting principles that the partnership would use if it were to prepare its financial statements just before the joining time".

108 Paragraph 713‑225(6)(a)

Omit "that can or must be recognised in the partnership's statement of financial position".

109 Paragraph 713‑265(4)(a)

110 Paragraph 713‑265(4)(a)

Omit "that can or must be recognised in the partnership's statement of financial position".

111 Subsection 995‑1(1)

Insert:

"accounting principles" : A matter is in accordance with accounting principles if it is in accordance with:

(a) * accounting standards; or

(b) if there are no accounting standards applicable to the matter--authoritative pronouncements of the Australian Accounting Standards Board that apply to the preparation of financial statements.

112 Subsection 995‑1(1)

Insert:

"accounting principles for tax cost setting" has the meaning given by:

(a) subsection 705‑70(3); and

(b) subsection 711‑45(1A).

113 Application provision

The amendments made by this Part apply on and after the day on which the Bill that became this Act was introduced into the House of Representatives.

Part 9 -- Inherited deductions

Income Tax Assessment Act 1997

114 At the end of section 705‑115

Add:

(3) Subsection (2) does not cover a deduction under section 43‑15 (which relates to * undeducted construction expenditure) if the joining entity * acquired the asset to which the deduction relates at or before 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997.

115 Subsection 711‑35(1)

Repeal the subsection, substitute:

(1) Work out the step 2 amount for the purposes of the table in subsection 711‑20(1) by multiplying all deductions covered by subsection (2) by the * general company tax rate.

116 At the end of section 711‑35

Add:

(3) Subsection (2) does not cover a deduction under section 43‑15 (which relates to * undeducted construction expenditure) if, because of section 701‑40 (the exit history rule), the leaving entity is taken to have * acquired the asset to which the deduction relates at or before 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997.

117 Application provision

(1) The amendments made by items 114 and 116 apply on and after 1 July 2002.

(2) The other amendment made by this Part applies on and after the day on which the Bill that became this Act was introduced into the House of Representatives.

Part 10 -- General insurance companies

Income Tax Assessment Act 1997

118 At the end of Subdivision 713‑M

Add:

713‑725 Treatment of certain assets and liabilities of general insurance companies

(1) This section applies if a * general insurance company becomes or ceases to be a * subsidiary member of a * consolidated group.

(2) If the * general insurance company becomes a * subsidiary member of the group:

(a) in working out the step 2 amount for the purposes of the table in section 705‑60, reduce that amount by the sum of the amount of each thing mentioned in subsection (4); and

(b) in working out the * tax cost setting amount of a thing mentioned in subsection (4) for the purposes of section 705‑35, treat the * market value of the thing as zero.

(3) If the * general insurance company ceases to be a * subsidiary member of the group:

(a) in working out the step 4 amount for the purposes of the table in section 711‑20, reduce that amount by the sum of the amount of each thing mentioned in subsection (4); and

(b) for the purposes of section 711‑25, treat the * terminating value of a thing mentioned in subsection (4) as zero.

(4) The things are the * general insurance company's:

(a) deferred acquisition costs in relation to the company's unearned premium reserve; and

(b) deferred reinsurance expenses in relation to the company's unearned premium reserve; and

119 Application provision

The amendment made by this Part applies in relation to a general insurance company becoming or ceasing to be a subsidiary member of a consolidated group or MEC group on or after 1 July 2002.

Part 11 -- Retained cost base assets

Division 1--Cash management trusts

Income Tax Assessment Act 1997

120 Subsection 705‑25(2)

Omit "paragraph (a) or (b)", substitute "paragraph (a), (b) or (ba)".

121 After paragraph 705‑25(5)(b)

Insert:

(ba) a unit in a * cash management trust, if:

(i) the redemption value of the unit is expressed in Australian dollars; and

(ii) the redemption value of the unit cannot increase; or

122 Subsection 995‑1(1)

Insert:

"cash management trust" means a trust that satisfies these requirements:

(a) the trust is of a kind commonly known as a cash management trust;

(b) each unit in the trust carries the same rights as every other unit in the trust.

Division 2--Rights to future income assets

Income Tax Assessment Act 1997

123 After subsection 705‑25(4A)

Insert:

Rights to payments in respect of uncompleted work etc.

(4B) If the * retained cost base asset is covered by paragraph (d) of the definition of that expression, its * tax cost setting amount is equal to the joining entity's * terminating value for the asset.

124 Subparagraph 705‑25(5)(c)(ii)

Omit "is incurred.", substitute "is incurred; or".

125 After paragraph 705‑25(5)(c)

Insert:

; or (d) a right that is an asset covered by section 716‑410 (rights to future amounts that are expected to be included in assessable income) if at the time the right was created:

(i) the * head company was the head company of a * consolidatable group; and

(ii) the joining entity was a * subsidiary member of the consolidatable group.

Division 3--Application provision

126 Application provision

(1) The amendments made by Division 1 of this Part apply in relation to a consolidated group or MEC group on and after:

(a) if the head company of the group makes a choice in accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act was introduced into the House of Representatives.

(2) A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3) A choice mentioned in paragraph (1)(a) must be made in writing.

(4) The amendments made by Division 2 of this Part apply in relation to a consolidated group or MEC group on and after 1 July 2002.

Part 12 -- Removal of CGT event L7

Income Tax Assessment Act 1997

127 Section 104‑5 (table item relating to CGT event L7)

Repeal the item.

128 Section 104‑530

Repeal the section.

129 Section 110‑10 (table item relating to CGT event L7)

Repeal the item.

Income Tax (Transitional Provisions) Act 1997

130 Section 701‑34

Repeal the section.

131 Application provision

(1) The amendments made by this Part apply on and after 1 July 2002.

(2) However, the amendments made by this Part do not apply in relation to a CGT event that:

(a) is CGT event L7; and

(b) happens before the day on which the Bill that became this Act was introduced into the House of Representatives; and

Part 13 -- Reduction in tax cost setting amount that exceeds market value of certain retained cost base assets

Income Tax Assessment Act 1997

132 After section 705‑25

Insert:

705‑27 Reduction in tax cost setting amount that exceeds market value of certain retained cost base assets

(1) If:

(a) a * retained cost base asset of the joining entity is a right to receive a specified amount of such Australian currency, covered by paragraph 705‑25(5)(b); and

(b) the * market value of the asset is less than the * tax cost setting amount of the asset; and

(c) the head company makes a * capital gain under * CGT event L3 (disregarding this subsection) as a result of the joining entity becoming a * subsidiary member of the group;

reduce the tax cost setting amount of the asset by the amount of the gain (but not below zero).

Note: Reducing the tax cost setting amount of the asset will also reduce the amount of the capital gain (see paragraph 104‑510(1)(b)). The amount of the capital gain might be reduced to nil.

(2) If:

(a) the requirements in subsection 701‑58(1) (intra‑group assets) are satisfied in relation to the asset; and

(b) the joining entity has been entitled to a deduction for an income year ending on or before the joining time because of the * market value of the asset being less than the specified amount mentioned in paragraph (1)(a); and

reduce the amount of the reduction under subsection (1) by the amount of the deduction (but not below zero).

(3) If the * tax cost setting amount of 2 or more of the joining entity's assets could be reduced in accordance with subsections (1) and (2):

(a) subsections (1) and (2) apply sequentially to each of those assets; and

(b) the * head company may choose the sequence of assets to which subsections (1) and (2) apply; and

(c) if the head company does not make such a choice--subsections (1) and (2) apply sequentially to each of those assets according to the time at which they were created, from earliest to latest.

Note: Once the amount of the capital gain is reduced to nil as a result of the application of subsections (1) and (2), no further reductions of tax cost setting amount can be made under those subsections.

(4) A choice the * head company can make under paragraph (3)(b) must be made:

(a) by the day the head company lodges its * income tax return for the income year in which the * CGT event happened; or

(b) within a further time allowed by the Commissioner.

(5) The way the * head company prepares its * income tax return is sufficient evidence of the making of the choice.

133 Paragraph 705‑35(1)(b)

Omit "in accordance with section 705‑25".

134 Application provision

(1) The amendments made by this Part apply in relation to entities that become members of a consolidated group or MEC group on or after:

(a) if the head company of the group makes a choice in accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act was introduced into the House of Representatives.

(2) A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3) A choice mentioned in paragraph (1)(a) must be made in writing.

Part 14 -- Blackhole expenditure for MEC Groups

Income Tax Assessment Act 1997

135 Paragraph 110‑35(10)(a)

After "a * consolidated group", insert "or * MEC group".

136 Application provision

The amendment made by this Part applies to CGT events happening on or after 1 July 2005.

Part 15 -- Transitional concession for SAPs

New Business Tax System (Consolidation and Other Measures) Act 2003

137 Subsection 2(1) (table item 2)

Repeal the item, substitute:

1A. Schedule 1, items 1 to 27	Immediately after the commencement of Schedule 1 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002	24 October 2002
1B. Schedule 1, item 27A	Immediately after the commencement of the provisions covered by table item 1A	24 October 2002
1C. Schedule 1, items 28 to 36	Immediately after the commencement of Schedule 1 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002	24 October 2002
2. Schedules 2 and 3	Immediately after the commencement of Schedule 1 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002	24 October 2002

138 After item 27 of Schedule 1

Insert:

27A Paragraph 701‑30(1)(a)

Repeal the paragraph, substitute:

(a) on or before the first day of the first income year of the head company starting after 30 June 2003; and

Note: Section 701‑30 of the Income Tax (Transitional Provisions) Act 1997 was repealed by item 285 of Schedule 1 to the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006 on 14 September 2006. Therefore the amendment made by this item will not apply after that repeal.

139 Application provision

(1) The amendments made by this Part apply in relation to a consolidated group or MEC group only if the head company of the group makes a choice in accordance with subitems (2) and (3).

(2) The choice must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3) The choice must be made in writing.

140 Transitional provision--revocation of choice for transitional entities

(1) This item applies in relation to a consolidated group or MEC group if:

(a) the head company of the group makes a choice in accordance with subitems (2) and (3) of the previous item; and

(b) the group came into existence:

(i) on or after 1 July 2003; and

(ii) on a day other than the first day of the first income year of the head company starting after 1 July 2003.

(2) In determining whether a choice under subsection 701 ‑5(1) of the Income Tax (Transitional Provisions) Act 1997 in relation to the group can be revoked, treat the reference in paragraph 701‑5(4)(a) of that Act to 31 December 2005 as instead being a reference to the day that is 6 months after the commencement of this item.

Part 16 -- Loss multiplication rules for widely held companies

Income Tax Assessment Act 1997

141 After subsection 165‑115X(2)

Insert:

(2A) A * widely held company that, apart from this subsection, would have a relevant equity interest in a * loss company at a particular time does not have such an interest at that time.

(2B) Subsection (2A) does not apply if:

(a) an entity has a controlling stake in the loss company (see section 165‑115Z); and

(b) that entity has a direct or indirect interest in, or is owed a debt by, the * widely held company, being an interest or debt in respect of which:

(i) the entity could, if a * CGT event happened in respect of the interest or debt, make a * capital loss (other than a capital loss that would be disregarded) that reflects any part of the loss company's overall loss; or

(ii) the entity has deducted or can deduct, or could deduct at a later time, an amount in respect of the cost of the * acquisition, or a net loss on the * disposal, of the interest or debt, where the deduction reflected or would have reflected, or would reflect, as the case may be, any part of the company's overall loss.

(2C) Subsection (2A) does not apply in respect of a particular time if an entity that had a direct or indirect interest in, or was owed a debt by, the * widely held company at an earlier time, and had a controlling stake in the loss company (see section 165‑115Z) at the earlier time:

(a) made a capital loss (other than a capital loss that was disregarded) because a * CGT event happened in respect of the interest or debt, where the capital loss reflected any part of the * loss company's overall loss; or

(b) has deducted or could have deducted at an earlier time, or could deduct at a later time, an amount in respect of the cost of the * acquisition, or a net loss on the * disposal, of the interest or debt, where the deduction reflected or would have reflected, or would reflect, as the case may be, any part of the company's overall loss.

142 After subsection 165‑115X(3)

Insert:

(3A) Subsection (3) does not apply if the first entity is a * widely held company.

143 Subsection 165‑115X(4)

Omit "However, subsection (3)", substitute "Subsection (3)".

144 After subsection 165‑115Y(3)

Insert:

(3A) A * widely held company that, apart from this subsection, would have a relevant debt interest in a * loss company at a particular time does not have such an interest at that time.

(3B) Subsection (3A) does not apply if:

(a) an entity has a controlling stake in the loss company (see section 165‑115Z); and

(b) that entity has a direct or indirect interest in, or is owed a debt by, the * widely held company, being an interest or debt in respect of which:

(3C) Subsection (3A) does not apply in respect of a particular time if an entity that had a direct or indirect interest in, or was owed a debt by, the * widely held company at an earlier time, and had a controlling stake in the * loss company (see section 165‑115Z) at the earlier time:

(a) made a * capital loss (other than a capital loss that was disregarded) because a * CGT event happened in respect of the interest or debt, where the capital loss reflected any part of the loss company's overall loss; or

145 After subsection 165‑115Y(4)

Insert:

(4A) Subsection (4) does not apply if the first entity is a * widely held company.

146 Subsection 165‑115Y(5)

Omit "However, subsection (4)", substitute "Subsection (4)".

146A Section 715‑230 (note 1)

Omit "a direct or indirect interest in a subsidiary member", substitute "certain kinds of interests in a member".

147 After paragraph 715‑255(1)(b)

Insert:

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

148 After subsection 715‑255(1)

Insert:

(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).

148A After section 715‑260

Insert:

715‑265 Head company does not have relevant equity or debt interest in a loss company if widely held top company does not have such an interest

(1) For the purposes of Subdivision 165‑CD, treat the * head company of a * consolidated group as not having a relevant equity interest in a * loss company at a particular time if:

(a) the head company is an * eligible tier‑1 company of a * top company at that time; and

(b) the top company is a * widely held company at that time; and

(c) because of subsections 165‑115X(2A), (2B) and (2C), the top company does not have a relevant equity interest under section 165‑115X in the loss company at that time.

(2) For the purposes of paragraph (1)(c), disregard the operation of subsection 701‑1(1) (the single entity rule) in determining whether subsection 165‑115X(2C) has the effect that the * top company has the relevant equity interest mentioned in that paragraph.

(3) For the purposes of Subdivision 165‑CD, treat the * head company of a * consolidated group as not having a relevant debt interest in a * loss company at a particular time if:

(a) the head company is an * eligible tier‑1 company of a * top company at that time; and

(b) the top company is a * widely held company at that time; and

(c) because of subsections 165‑115Y(3A), (3B) and (3C), the top company does not have a relevant debt interest under section 165‑115Y in the loss company at that time.

149 Subsection 715‑270(5)

Omit "If the trust is a * loss company at the leaving time, the * head company must", substitute "If the trust is a * loss company at the leaving time and the * head company has a relevant equity interest under section 165‑115X in the leaving entity at the leaving time, the head company must".

150 After subsection 715‑270(5)

Insert:

(5A) For the purposes of subsection (5), 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).

150A Section 715‑450 (note)

Omit "a direct or indirect interest in a subsidiary member", substitute "certain kinds of interests in a member".

150B Subdivision 715‑H (heading)

Repeal the heading, substitute:

Subdivision 715‑H -- Cancelling loss on realisation event for direct or indirect interest in a member of a consolidated group

150C Paragraph 715‑610(2)(d)

Omit "a consolidated group.", substitute "a consolidated group; or".

150D At the end of subsection 715‑610(2)

Add:

(e) all of these conditions are satisfied at that time:

(i) the realised interest was an equity or loan interest, an * indirect equity or loan interest or an external indirect equity or loan interest, in the * head company of a consolidated group;

(ii) the owner was not a member of the group;

(iii) the head company was an * eligible tier‑1 company of a * top company.

150E Subsection 715‑610(3)

Omit "a * subsidiary member", substitute "a member".

150F Subsection 715‑610(3)

Omit "the subsidiary member" (wherever occurring), substitute "the member".

151 After section 719‑735

Insert:

719‑740 Head company does not have relevant equity or debt interest in a loss company if widely held top company does not have such an interest

(1) For the purposes of Subdivision 165‑CD, treat the * head company of a * MEC group as not having a relevant equity interest in a * loss company at a particular time if:

(a) the * top company of the group is a * widely held company at that time; and

(b) because of subsections 165‑115X(2A), (2B) and (2C), the top company does not have a relevant equity interest under section 165‑115X in the loss company at that time.

(2) For the purposes of paragraph (1)(b), disregard the operation of subsection 701‑1(1) (the single entity rule) in determining whether subsection 165‑115X(2C) has the effect that the * top company has the relevant equity interest mentioned in that paragraph.

(3) For the purposes of Subdivision 165‑CD, treat the * head company of a * MEC group as not having a relevant debt interest in a * loss company at a particular time if:

(a) the * top company of the group is a * widely held company at that time; and

(b) because of subsections 165‑115Y(3A), (3B) and (3C), the top company does not have a relevant debt interest under section 165‑115Y in the loss company at that time.

152 Application provision

The amendments made by this Part apply on and after 1 July 2002.

Part 17 -- CGT straddles

Income Tax Assessment Act 1997

153 At the end of Subdivision 716‑Z

Add:

716‑860 CGT event straddling joining or leaving time

(1) This section applies if:

(a) an entity (the joining entity ) becomes a subsidiary member of a * consolidated group at a particular time (the joining time ); and

(b) disregarding the operation of subsection 701‑1(1) (the single entity rule), the joining entity held a * CGT asset at the joining time; and

(c) taking into account the operation of subsection 701‑1(1) (the single entity rule), the * head company of the group held the CGT asset at the joining time; and

(d) a * CGT event happened in relation to the asset at a time before the joining time (disregarding this section), but the circumstances that gave rise to the CGT event first existed at a time on or after the joining time.

(2) This section also applies if:

(a) an entity (the leaving entity ) ceases to be a * subsidiary member of a * consolidated group at a particular time (the leaving time ); and

(b) taking into account the operation of subsection 701‑1(1) (the single entity rule), the * head company of the group held a * CGT asset at the leaving time; and

(c) disregarding the operation of subsection 701‑1(1) (the single entity rule), the leaving entity held the CGT asset at the leaving time; and

(d) a * CGT event happened in relation to the asset at a time before the leaving time (disregarding this section), but the circumstances that gave rise to the CGT event first existed at a time on or after the leaving time.

(3) For the purposes of this Act, treat the * CGT event as happening at the time when the circumstances that gave rise to the CGT event first existed.

154 Application provision

The amendment made by this Part applies in relation to CGT events that happen after 8 May 2007.

Part 18 -- Choice to consolidate

Income Tax Assessment Act 1997

155 Subsection 703‑50(1)

Omit "in the * approved form given to the Commissioner within the period described in subsection (3)", substitute "in writing".

156 At the end of subsection 703‑50(1)

Add:

Note: The head company of the group must give the Commissioner a notice in the approved form containing information about the group (see sections 703‑58 and 703‑60).

157 Subsection 703‑50(3)

Repeal the subsection, substitute:

(3) The choice can be made no later than:

(a) if the company is required to give the Commissioner its * income tax return for the income year during which the specified day mentioned in subsection (1) occurs--the day on which the company gives the Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

158 Subsections 703‑50(5) and (6)

Repeal the subsections.

159 Before section 703‑60 (after the group heading)

Insert:

703‑58 Notice of choice to consolidate

(1) If a * consolidated group comes into existence on the day specified in a choice under section 703‑50, the * head company of the group must give the Commissioner a notice in the * approved form containing the following information:

(a) the identity of the head company;

(b) the day specified in the choice on which the * consolidatable group is taken to be consolidated;

(d) the identity of each entity that was a subsidiary member of the group on that day but was not such a subsidiary member when the notice is given;

(e) the identity of each entity that was not a subsidiary member of the group on that day but was such a subsidiary member when the notice is given;

(f) the identity of each entity that became a subsidiary member of the group after that day but was not such a subsidiary member when the notice is given.

(2) The notice must be given no later than:

(a) if the * head company is required to give the Commissioner its * income tax return for the income year during which that day occurs--the day on which the company gives the Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the head company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

160 Paragraph 703‑60(2)(b)

Omit "more than 28 days before the choice is made", substitute "before the relevant notice is given to the Commissioner under section 703‑58 (notice of choice to consolidate)".

161 Subsection 703‑60(2)

Omit "at the same time as the choice is made".

162 After subsection 703‑60(2)

Insert:

(2A) The notice must be given no later than:

(b) otherwise--the last day in the period within which the head company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

163 Paragraph 703‑60(3)(b)

Omit "a notice of choice under section 719‑50 is given after that time", substitute "a choice under section 719‑50 is made after that time".

164 Paragraph 703‑60(3)(c)

Omit "more than 28 days before the notice of choice is given", substitute "before the relevant notice is given to the Commissioner under section 719‑76 (notice of choice to consolidate)".

165 Subsection 703‑60(3)

Omit "at the same time as the notice of choice is given".

166 At the end of section 703‑60

Add:

(4) The notice must be given no later than:

(b) otherwise--the last day in the period within which the head company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

167 Paragraph 719‑5(4)(c)

Omit "within the applicable period worked out under subsection (6), the * provisional head company of the MEC group gives the Commissioner a written notice, in the * approved form", substitute "the * provisional head company of the MEC group makes a choice in writing no later than the day mentioned in subsection (6)".

168 Paragraph 719‑5(4)(d)

Omit "the notice under paragraph (c)" (wherever occurring), substitute "the choice".

169 Paragraph 719‑5(4)(f)

Omit "the notice under paragraph (c)", substitute "the choice".

170 At the end of subsection 719‑5(4)

Add:

Note: The provisional head company of the group must give the Commissioner a notice in the approved form containing information about each entity that becomes a subsidiary member of the group on that day because of the choice (see sections 719‑77 and 719‑80).

171 Subsection 719‑5(6)

Repeal the subsection, substitute:

(6) The day mentioned in paragraph (4)(c) is:

(a) if the company mentioned in subsection (6A) is required to give the Commissioner its * income tax return for the income year during which the time mentioned in paragraph (4)(b) occurs--the day on which that company gives the Commissioner that income tax return; or

(b) otherwise--the last day in the period within which that company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

(6A) The company is:

(a) in a case where subsection 719‑75(1) or (2) applies--the company that will be the * head company of the group as at the end of the income year; and

(b) in a case where subsection 719‑75(3) applies--the company that will be the head company of the group immediately before the group ceased to exist.

172 Paragraph 719‑40(1)(e)

Omit "within the applicable period worked out under subsection (2), the company mentioned in paragraph (b) gives the Commissioner a written notice, in the * approved form", substitute "the company mentioned in paragraph (b) makes a choice in writing no later than the day mentioned in subsection (2)".

173 Subparagraph 719‑40(1)(e)(ii)

After "comes into existence", insert "at that time".

174 Paragraph 719‑40(1)(f)

Omit "the notice under paragraph (e)" (wherever occurring), substitute "the choice".

175 At the end of subsection 719‑40(1)

Add:

Note: The company mentioned in paragraph (b) must give the Commissioner a notice in the approved form containing information about the special conversion event (see sections 719‑78 and 719‑80).

176 Subsection 719‑40(2)

Repeal the subsection, substitute:

(2) The day mentioned in paragraph (1)(e) is:

(a) if the company is required to give the Commissioner its * income tax return for the income year during which that time occurs--the day on which the company gives the Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

177 Subsection 719‑50(1)

Repeal the subsection, substitute:

Making a choice to consolidate

(1) If:

(a) a * potential MEC group (the first group ) derived from 2 or more * eligible tier‑1 companies of a * top company is in existence at the start of a particular day; and

(b) that day is after 30 June 2002; and

those eligible tier‑1 companies, jointly, may make a choice in writing that the first group be consolidated on and after that day. If they do so, the choice must specify that day.

Note: The provisional head company must give the Commissioner a notice in the approved form containing information about the group (see sections 719‑76 and 719‑80).

178 Subsection 719‑50(3)

Repeal the subsection, substitute:

(3) A choice can be made no later than:

(a) if the company mentioned in subsection (3A) is required to give the Commissioner its * income tax return for the income year during which that day occurs--the day on which that company gives the Commissioner that income tax return; or

(b) otherwise--the last day in the period within which that company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

(3A) The company is:

(a) in a case where subsection 719‑75(1) or (2) applies--the company that will be the * head company of the group as at the end of the income year; and

(b) in a case where subsection 719‑75(3) applies--the company that will be the head company of the group immediately before the group ceased to exist.

179 Paragraph 719‑50(4)(b)

Repeal the paragraph, substitute:

(b) another company (the other company ) that was an eligible tier‑1 company at the start of the specified day ceased to exist at a time before:

(i) the day on which the company mentioned in paragraph (a) gives the Commissioner its * income tax return for the income year during which the day specified in the choice occurs; or

(ii) the last day in the period within which the company mentioned in paragraph (a) would be required to give the Commissioner such a return if it were required to give the Commissioner such a return; and

180 Section 719‑55

Repeal the section, substitute:

719‑55 When choice starts to have effect

A choice under section 719‑50 is taken to have started to have effect on the day specified in the choice.

181 Subsection 719‑60(1)

Omit "give notice of a choice under section 719‑50, the notice", substitute "make a choice under section 719‑50, the choice".

182 Subsection 719‑60(3)

Repeal the subsection, substitute:

Appointment after formation of group

(3) If a * cessation event happens to the * provisional head company of a * MEC group, the * eligible tier‑1 companies that are or were members of the MEC group immediately after the cessation event may make a choice in writing, jointly appointing one of those companies to be the provisional head company of the group. The appointment is taken to have come into force immediately after the cessation event.

183 Before section 719‑80 (after the group heading)

Insert:

719‑76 Notice of choice to consolidate

(1) This section applies if:

(a) a * MEC group comes into existence on the day specified in a choice under section 719‑50; and

(b) subsection 719‑75(1), (2) or (3) would apply to the MEC group in relation to the * income year of a company in which the specified day occurred; and

(c) in a case where subsection 719‑75(1) or (2) applies--the company will be the * head company of the group as at the end of the income year; and

(d) in a case where subsection 719‑75(3) applies--the company will be the head company of the group immediately before the group ceased to exist.

(2) The company must give the Commissioner a notice in the * approved form containing the following information:

(a) the identity of the company;

(b) the day specified in the choice on which the * MEC group comes into existence;

(d) the identity of each * subsidiary member of the group on that day;

(e) the identity of each entity that was a subsidiary member of the group on that day but was not such a subsidiary member when the notice is given;

(f) the identity of each entity that was not a subsidiary member of the group on that day but was such a subsidiary member when the notice is given;

(g) the identity of each entity that became a subsidiary member of the group after that day but was not such a subsidiary member when the notice is given.

(3) The notice must be given no later than:

(a) if the company is required to give the Commissioner its * income tax return for the income year during which that day occurs--the day on which the company gives the Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

719‑77 Notice in relation to new eligible tier‑1 members etc.

(1) This section applies if:

(a) a * MEC group consists of the members of a * potential MEC group derived from one or more * eligible tier‑1 companies of a * top company; and

(b) one or more other companies become eligible tier‑1 companies of the top company at a time because of a choice under subsection 719‑5(4).

(2) The * head company of the * MEC group must give the Commissioner a notice in the * approved form containing the following information:

(a) the identity of the head company;

(b) the time mentioned in paragraph (1)(b);

(c) the identity of each entity that became an * eligible tier‑1 company of the * top company in relation to the MEC group at that time because of the choice;

(d) the identity of each entity that became a * subsidiary member of the group at that time because of the choice;

(e) the identity of each entity that was a subsidiary member of the group at that time but was not such a subsidiary member when the notice is given.

(3) The notice must be given no later than:

(a) if the * head company is required to give the Commissioner its * income tax return for the income year during which that time occurs--the day on which the head company gives the Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the head company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

719‑78 Notice of special conversion event

(1) This section applies if a * MEC group comes into existence at the time because of a choice under paragraph 719‑40(e).

(2) The company mentioned in paragraph 719‑40(b) must give the Commissioner a notice in the * approved form containing the following information:

(a) the identity of the company;

(b) the time at which the * MEC group comes into existence;

(d) the identity of each * subsidiary member of the group at that time;

(e) the identity of each entity that was a subsidiary member of the group at that time but was not such a subsidiary member when the notice is given;

(f) the identity of each entity that was not a subsidiary member of the group at that time but was such a subsidiary member when the notice is given;

(g) the identity of each entity that became a subsidiary member of the group after that time but was not such a subsidiary member when the notice is given.

(3) The notice must be given no later than:

(b) otherwise--the last day in the period within which the company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

719‑79 Notice of appointment of provisional head company after formation of group

(1) This section applies if an entity is appointed to be the * provisional head company of a * MEC group because of a choice under subsection 719‑60(3).

(2) The * provisional head company must give the Commissioner a notice in the * approved form containing the following information:

(a) the identity of the provisional head company;

(b) the day on which the choice was made;

(3) The notice must be given no later than:

(a) if:

(i) the group came into existence because of a choice under section 719‑50; and

(ii) the event happens more than 28 days before a notice under section 719‑76 in relation to the choice is given;

the day on which the notice mentioned in subparagraph (ii) is given; or

(b) in any other case--28 days after the * cessation event.

184 Subparagraph 719‑80(2)(a)(ii)

Omit "more than 28 days before notice of the choice is given", substitute "before the relevant notice is given to the Commissioner under section 719‑76 (notice of choice to consolidate)".

185 Paragraph 719‑80(2)(a)

Omit "on the day on which notice of the choice is given", substitute "no later than the day mentioned in subsection (3)".

186 Subparagraph 719‑80(2)(b)(iii)

Omit "more than 28 days before notice of the choice is given", substitute "before the relevant notice is given to the Commissioner under section 703‑58 (notice of choice to consolidate)".

187 Paragraph 719‑80(2)(b)

Omit "on the day on which notice of the choice is given", substitute "no later than the day mentioned in subsection (3)".

188 At the end of section 719‑80

Add:

(3) The day is:

(a) if the entity is required to give the Commissioner its * income tax return for the income year during which the notifiable event happens--the day on which the company gives the Commissioner that income tax return; or

(b) otherwise--the last day in the period within which the entity would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

Income Tax (Transitional Provisions) Act 1997

189 Paragraph 701‑5(2)(a)

Repeal the paragraph, substitute:

(a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and

190 Paragraph 701D‑15(3)(a)

Repeal the paragraph, substitute:

(a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and

Taxation Administration Act 1953

191 Paragraph 45‑885(1)(e) in Schedule 1

Omit "the Commissioner receives the choice to consolidate", substitute "the Commissioner receives the notice under section 703‑58 of the Income Tax Assessment Act 1997 in relation to the choice to consolidate".

192 Section 45‑935 in Schedule 1 (table item 1)

Omit "the Commissioner receives a notice of the consolidation", substitute "the Commissioner receives a notice under section 719‑76 of the Income Tax Assessment Act 1997 in relation the consolidation".

193 Application provision

(1) The amendments made by this Part apply in relation to a consolidated group or MEC group on or after:

(a) if the head company of the consolidated group (or the head company or provisional head company of the MEC group) makes a choice in accordance with subitems (2) and (3)--10 February 2010; or

(b) otherwise--1 July 2002.

(2) A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2014; or

(b) within a further time allowed by the Commissioner.

(3) A choice mentioned in paragraph (1)(a) must be made in writing.

Part 19 -- Life insurance companies

Division 1--Amendments applying before the introduction of first home saver accounts

Income Tax Assessment Act 1997

194 After section 713‑510

Insert:

713‑510A Disregard single entity rule in working out certain amounts in respect of life insurance company

(1) This section applies if a * life insurance company is a * member of a * consolidated group.

(2) However, if the * life insurance company is a * subsidiary member of the group, this section does not apply:

(a) for the purposes of working out the * tax cost setting amount of an asset of the life insurance company when it becomes a subsidiary member of the group; and

(b) for the purposes of working out the tax cost setting amount of a * membership interest in the life insurance company if it ceases to be a subsidiary member of the group.

(3) Disregard section 701‑1 (the single entity rule) in working out any of the following for the purposes of Division 320 in relation to the * life insurance company:

(a) amounts of the * head company's ordinary income and statutory income derived from * segregated exempt assets that are not assessable income and are not * exempt income under paragraph 320‑37(1)(a);

(b) the head company's taxable income of the * complying superannuation class (see section 320‑137);

(d) the total * transfer value of the head company's * virtual PST assets (see paragraph 320‑175(1)(a));

(e) the amount of the head company's virtual PST liabilities (see paragraph 320‑175(1)(b));

(f) the total transfer value of the head company's segregated exempt assets (see paragraph 320‑230(1)(a));

(g) the amount of the head company's * exempt life insurance policy liabilities (see paragraph 320‑230(1)(b)).

195 Group heading before section 713‑553

Repeal the heading.

196 Sections 713‑553, 713‑555 and 713‑560

Repeal the sections.

197 Application provision

The amendments made by this Division apply on and after 1 July 2002.

Division 2--Amendments applying from the introduction of first home savers accounts

Income Tax Assessment Act 1997

198 Paragraph 713‑510A(3)(b)

Omit " * complying superannuation class", substitute " * complying superannuation/FHSA class".

199 Paragraph 713‑510A(3)(c)

Omit "complying superannuation class", substitute "complying superannuation/FHSA class".

200 Paragraph 713‑510A(3)(d)

Omit " * virtual PST", substitute " * complying superannuation/FHSA".

201 Paragraph 713‑510A(3)(e)

Omit " * virtual PST", substitute " * complying superannuation/FHSA".

202 Application provision

The amendments made by this Division apply on and after the commencement of the First Home Saver Accounts (Consequential Amendments) Act 2008 .

Part 20 -- Non‑membership equity interests

Income Tax Assessment Act 1997

203 Subsection 705‑65(6)

Repeal the subsection, substitute:

Non‑membership equity interests

(6) For the purposes of this section, if at the joining time a * member of the joined group holds a * non‑membership equity interest in the joining entity, that non‑membership equity interest is treated as if it were a * membership interest in the joining entity.

204 Subsection 705‑85(3) (heading)

Repeal the heading, substitute:

Increase to cover certain non‑membership equity interests and certain equity interests

205 Paragraph 705‑85(3)(a)

Repeal the paragraph, substitute:

(a) the amount that would be the balance of the joining entity's * non‑share capital account, assuming that:

(i) if the joining entity is not a company--the joining entity were a company; and

(ii) each * non‑membership equity interest (if any) in the joining entity held at the joining time by a person other than a * member of the joined group were a * non‑share equity interest in the joining entity; and

(iii) the non‑share equity interests (if any) mentioned in subparagraph (ii) were the only non‑share equity interests in the joining entity; and

206 Paragraph 705‑85(3)(b)

Omit "market value", substitute " * market value".

207 Subsection 705‑145(5)

Repeal the subsection, substitute:

Non‑membership equity interests

(5) For the purposes of this section, if, on becoming a * subsidiary member, an entity holds a * non‑membership equity interest in another entity that becomes a subsidiary member at the same time, that non‑membership equity interest is treated as if it were a * membership interest in that other entity.

208 Subsection 705‑195(1)

Omit "rights or options", substitute " * non‑membership equity interests".

209 Subsection 705‑195(2)

Repeal the subsection, substitute:

Non‑membership equity interests

(2) Subsection 705‑65(6) has effect as if it also treated as a * membership interest in the * head company of the acquired group a * non‑membership equity interest in a * subsidiary member of the acquired group, where that interest was held at the acquisition time by a * member of the acquiring group.

210 Paragraph 705‑200(1)(b)

Omit "rights or options to acquire * membership interests", substitute " * non‑membership equity interests".

211 Subsection 705‑200(3)

Repeal the subsection, substitute:

Non‑membership equity interests

(3) Paragraph 705‑85(3)(a) has effect as if it also increased the step 2 amount worked out under section 705‑70 by the amount that would be the sum of the balances of the * non‑share capital accounts of the * subsidiary members of the acquired group, assuming that:

(a) for a subsidiary member that is not a company--the subsidiary member were a company; and

(b) each * non‑membership equity interest (if any) in a subsidiary member held at the acquisition time by a person other than a * member of the acquiring group or acquired group were a * non‑share equity interest in the subsidiary member; and

(c) the non‑share equity interests (if any) mentioned in paragraph (b) were the only non‑share equity interests in the subsidiary member.

212 Subsection 705‑225(5)

Repeal the subsection, substitute:

Non‑membership equity interests

(5) For the purposes of this section, if, on becoming a * subsidiary member, a linked entity holds a * non‑membership equity interest in another linked entity, that interest is treated as if it were a * membership interest in that other linked entity.

213 Subsection 711‑15(2)

Repeal the subsection, substitute:

Non‑membership equity interests

(2) For the purposes of this section, if at the leaving time a * member of the old group holds a * non‑membership equity interest in the leaving entity, that non‑membership equity interest is treated as if:

(a) it were a * membership interest in the leaving entity; and

(b) it were of a different class than any other membership interest in the leaving entity.

214 Subsection 711‑20(1) (cell at table item 4, column headed "Purpose of the step")

Omit " * market".

215 After subsection 711‑45(6A)

Insert:

Increase for non‑share capital account balance

(6B) The step 4 amount is increased by the amount that would be the balance of the leaving entity's * non‑share capital account, assuming that:

(a) if the leaving entity is not a company--the leaving entity were a company; and

(b) each * non‑membership equity interest (if any) in the leaving entity held at just before the leaving time by a person other than a * member of the old group were a * non‑share equity interest in the leaving entity; and

(c) the non‑share equity interests (if any) mentioned in paragraph (b) were the only non‑share equity interests in the leaving entity.

216 Subsection 715‑50(6)

Repeal the subsection, substitute:

Non‑membership equity interests

(6) Subsection 705‑65(6) (which treats * non‑membership equity interests as * membership interests) also applies for the purposes of this section.

217 Subsection 715‑255(6)

Repeal the subsection, substitute:

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.

218 Subsection 715‑270(10)

Repeal the subsection, substitute:

Non‑membership equity interests

(10) 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 is the old group referred to in that subsection.

219 Subsection 995‑1(1)

Insert:

"non-membership equity interest" : an interest in an entity is a non-membership equity interest in the entity at a time to the extent that it is not an accounting liability (within the meaning of subsection 705-70(1)) of the entity at that time, if:

(a) the interest is not a * membership interest in the entity at that time; and

(b) the interest is not a * debt interest in the entity at that time.

In determining the extent to which the interest is not an accounting liability at that time:

(d) treat the reference in that subsection to the joining time as instead being a reference to that time.

220 Application provision

(1) The amendments made by this Part apply in relation to a consolidated group or MEC group on and after:

(a) if the head company of the group makes a choice in accordance with subitems (2) and (3)--1 July 2002; or

(b) otherwise--the day on which the Bill that became this Act was introduced into the House of Representatives.

(2) A choice mentioned in paragraph (1)(a) must be made:

(a) on or before 30 June 2011; or

(b) within a further time allowed by the Commissioner.

(3) A choice mentioned in paragraph (1)(a) must be made in writing.

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TAX LAWS AMENDMENT (2010 MEASURES NO. 1) ACT 2010 (NO. 56, 2010) - SCHEDULE 5 Consolidation