When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets
701-40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets
This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied.
Asset held at leaving time
Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset.
Reduction of asset’s tax cost setting amount for over‑depreciation
When the transitional group came into existence:
the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and
former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset.
Asset held continuously within group
The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group.
Head company’s choice
If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses.
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