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INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS    View history reference

Division 701 - Core rules    View history reference

Supporting provisions  

SECTION 701-55  Setting the tax cost of an asset  

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701-55(1)  

This section states the meaning of the expression an asset's tax cost is set at a particular time at the asset's *tax cost setting amount.

Depreciating asset provisions

701-55(2)  

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If any of Subdivisions 40-A to 40-D, sections 40-425 to 40-445 and Subdivisions 328-D and 355-E is to apply in relation to the asset, the expression means that the provisions apply as if:


(a) the asset were *acquired at the particular time for a payment equal to its *tax cost setting amount; and


(b) at that time the same method of working out the decline in value were chosen for the asset as applied to it just before that time; and


(c) where just before that time the prime cost method applied for working out the asset's decline in value and the asset's tax cost setting amount does not exceed the joining entity's *terminating value for the asset - at that time an *effective life were chosen for the asset equal to the remainder of the effective life of the asset just before that time; and


(d) where just before that time the prime cost method applied for working out the asset's decline in value and the asset's *tax cost setting amount exceeds the joining entity's terminating value for the asset - either:

(i) the *head company were required to choose at that time an effective life for the asset in accordance with subsections 40-95(1) and (3), and any choice of an effective life determined by the Commissioner were limited to one in force at that time; or

(ii) an effective life for the asset were worked out under subsection 40-95(7), (8), (9) or (10) at that time; and
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(e) where neither paragraph (c) nor (d) applies - at that time an effective life were chosen for the asset equal to the asset's effective life just before that time.

Trading stock provisions

701-55(3)  

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If Division 70 (other than Subdivision 70-E) is to apply in relation to the asset, the expression means that the Division applies as if the asset were *trading stock at the start of the income year in which the particular time occurs and its *value at that time were equal to its *tax cost setting amount.

Registered emissions unit provisions

701-55(3A)  

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If Division 420 is to apply in relation to the asset, the expression means that the Division applies as if the asset were a *registered emissions unit at the start of the income year in which the particular time occurs, and its *value at that time were equal to the asset's *tax cost setting amount.

Qualifying security provisions

701-55(4)  

If Division 16E of Part III of the Income Tax Assessment Act 1936 is to apply in relation to the asset, the expression means that the Division applies as if the asset were acquired at the particular time for a payment equal to the asset's *tax cost setting amount.

Capital gain and loss provisions

701-55(5)  

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If Part 3-1 or 3-3 is to apply in relation to the asset, the expression means that the Part applies as if the asset's *cost base or *reduced cost base were increased or reduced so that the cost base or reduced cost base at the particular time equals the asset's *tax cost setting amount.

Division 230 (financial arrangements)

701-55(5A)  

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If Division 230 is to apply in relation to the asset, the expression means that the Division applies as if the asset were acquired at the particular time for a payment equal to:


(a) unless paragraph (b) applies - the asset's *tax cost setting amount; or


(b) if the asset's tax cost is set because an entity becomes a *subsidiary member of a *consolidated group, and Subdivision 230-C (fair value method), Subdivision 230-D (foreign exchange retranslation method) or Subdivision 230-F (reliance on financial reports method) is to apply in relation to the asset - the asset's *Division 230 starting value at the particular time.

701-55(5B)  

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To avoid doubt, for the purposes of paragraph (5A)(b), determine the asset's *Division 230 starting value by reference to the relevant standards (as mentioned in section 230-230, 230-280 or 230-420) that apply in relation to the *head company's financial report for the income year in which the entity becomes a subsidiary member of the group.

WIP amount assets

701-55(5C)  

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If:


(a) the asset's tax cost is set because an entity becomes a *subsidiary member of a *consolidated group at the particular time; and


(b) the asset is a *WIP amount asset;

the expression means that section 25-95 applies as if the *head company had paid a *work in progress amount for the income year in which the particular time occurs equal to the *tax cost setting amount of the asset.

Consumable stores

701-55(5D)  

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If:


(a) the asset's tax cost is set because an entity becomes a *subsidiary member of a *consolidated group at the particular time; and


(b) the asset is consumable stores;

the expression means that, for the purposes of section 8-1, the *head company of the group is taken to have incurred an outgoing at the particular time in acquiring the asset equal to the asset's *tax cost setting amount.

Other provisions

701-55(6)  

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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;


(c) expenditure 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 2:

For specific clarifications of the operation of this subsection in relation to bad debts, see Subdivision 716-S.


 



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