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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 104 - CGT events  

Subdivision 104-L - Consolidated groups and MEC groups    View history reference

SECTION 104-500  Loss of pre-CGT status of membership interests in entity becoming subsidiary member: CGT event L1  

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104-500(1)  

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CGT event L1 happens if, under section 705-57 (including in its application in accordance with Subdivisions 705-B to 705-E ), there is a reduction in the *tax cost setting amount of assets of an entity that becomes a *subsidiary member of a *consolidated group or a *MEC group.

104-500(2)  

The time of the event is just after the entity becomes a *subsidiary member of the group.

104-500(3)  

For the head company core purposes mentioned in subsection 701-1(2) , the *head company makes a capital loss equal to the reduction.

104-500(4)  

The amount of the capital loss that can be applied to reduce the head company ' s *capital gains for the first income year ending after the entity becomes a *subsidiary member of the group (the first income year ) cannot exceed 1/5 of the *capital loss.

104-500(5)  

The amount of the *net capital loss from the first income year, to the extent the amount is attributable to the *capital loss (the extent being the event L1 attributable loss ), that can be applied to reduce the head company ' s *capital gains for a later income year cannot exceed the amount worked out for the year using the following table:
Limit on applying event L1 attributable loss
Item For this income year: The amount of the event L1 attributable loss that can be applied cannot exceed:
1 For the second income year ending after the entity became a *subsidiary member The difference between:

(a) 2/5 of the *capital loss; and

(b) the amount of the capital loss that was applied in accordance with subsection (4) for the first income year.
2 For the third income year ending after the entity became a *subsidiary member The difference between:

(a) 3/5 of the *capital loss; and

(b) the sum of the amount mentioned in paragraph (b) of item 1 and the amount of the event L1 attributable loss that was applied to reduce the entity ' s *capital gains for the next income year after the first income year.
3 For the fourth income year ending after the entity became a *subsidiary member The difference between:

(a) 4/5 of the *capital loss; and

(b) the sum of the amount mentioned in paragraph (b) of item 1 and the amounts of the event L1 attributable loss that were applied to reduce the entity ' s *capital gains for earlier income years ending after the first income year.
4 For the fifth income year ending after the entity became a *subsidiary member, or for any later income year The difference between:

(a) the *capital loss; and

(b) the sum of the amount mentioned in paragraph (b) of item 1 and the amounts of the event L1 attributable loss that were applied to reduce the entity ' s *capital gains for earlier income years ending after the first income year.


 



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