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

New Business Tax System (Consolidation and Other Measures) Act 2003 Act No. 16 of 2003 as amended This compilation was prepared on 18 August 2010 taking into account amendments up to Act No. 75 of 2010 The text of any of those amendments not in force on that date is appended in the Notes section The operation of amendments that have been incorporated may be affected by application provisions that are set out in the Notes section Prepared by the Office of Legislative Drafting and Publishing, Attorney‑General's Department, Canberra Contents 1 Short title [see Note 1]........................... 2 Commencement 3 Schedule(s) Schedule 1—Consolidation: amendments of various cost base provisions Part 1—Adjustments to restrict step 4 reduction in allocable cost amount in Subdivision 705‑B and 705‑D cases Income Tax Assessment Act 1997 Part 2—Consequential amendments relating to simplified imputation system Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Part 3—Changes to tax cost setting amount in Subdivision 705‑B and 705‑D cases to take account of steps 3 and 5 of allocable cost amount Income Tax Assessment Act 1997 Part 4—Adjustment to allocable cost amount for certain pre‑joining time roll‑overs from foreign residents Income Tax Assessment Act 1997 Part 5—Technical corrections Income Tax Assessment Act 1997 Part 6—Extension of transitional provision relating to step 3 of allocable cost amount on group formation Income Tax (Transitional Provisions) Act 1997 Part 7—Transitional group's allocable cost amount for subsidiary members other than chosen transitional entities Income Tax (Transitional Provisions) Act 1997 Part 8—Inclusion in certain transitional provisions of references to the Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Schedule 2—Consolidation: beneficial ownership Income Tax Assessment Act 1997 Schedule 3—Consolidation: technical amendment of membership rules Income Tax Assessment Act 1997 Schedule 4—Consolidation: adjustments for errors etc. Part 1—New Subdivision 705‑E Income Tax Assessment Act 1997 Part 2—Consequential amendments Income Tax Assessment Act 1997 Taxation Administration Act 1953 Schedule 5—Consolidation: imputation rules Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Schedule 6—Consolidation: life insurance companies Part 1—Life insurance companies and consolidation Income Tax Assessment Act 1997 Part 2—Consequential amendments Income Tax Assessment Act 1997 Part 3—Transitional provisions Income Tax (Transitional Provisions) Act 1997 Taxation Administration Act 1953 Schedule 7—Consolidation: interactions between Consolidation rules and other rules Part 1—New Division 715 inserted in the Income Tax Assessment Act 1997 Part 2—New Subdivision 719‑T inserted in the Income Tax Assessment Act 1997 Part 3—Consequential amendment of the Income Tax Assessment Act 1997 Part 4—Dictionary amendments Income Tax Assessment Act 1997 Schedule 8—Consolidation: various provisions about CFCs, FIFs and FLPs Income Tax Assessment Act 1997 Schedule 9—Consolidation: foreign dividend accounts Part 1—Basic amendments Income Tax Assessment Act 1997 Part 2—Related amendments Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Schedule 10—Consolidation: offshore banking units Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Schedule 11—Consolidation: application of rules to MEC groups Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Schedule 12—Consolidation: MEC group cost setting rules Income Tax Assessment Act 1997 Schedule 13—Consolidation: MEC groups and losses Part 1—Basic amendments Income Tax Assessment Act 1997 Part 2—Related amendments Income Tax Assessment Act 1997 Schedule 14—Consolidation: liability rules Income Tax Assessment Act 1997 Taxation Administration Act 1953 Schedule 15—Consolidation: general application provision Income Tax (Transitional Provisions) Act 1997 Schedule 16—Consolidation: transitional foreign‑held membership structures Part 1—Amendment of the Income Tax Assessment Act 1997 Part 2—Amendment of the Income Tax (Transitional Provisions) Act 1997 Schedule 17—Consolidation: transitional cost setting rule relating to roll‑overs Income Tax (Transitional Provisions) Act 1997 Schedule 18—Consolidation: extra transitional provision for foreign tax credits New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 Schedule 19—Consolidation: amendment of losses rules Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 New Business Tax System (Consolidation) Act (No. 1) 2002 Schedule 20—Consolidation: transfers of losses involving financial corporations Financial Corporations (Transfer of Assets and Liabilities) Act 1993 Schedule 21—Consolidation: CGT events relating to various cost base provisions Income Tax Assessment Act 1997 Schedule 22—Consolidation: thin capitalisation Income Tax Assessment Act 1997 Schedule 23—Consolidation: research and development Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Taxation Administration Act 1953 Schedule 24—Consolidation: pay as you go (PAYG) instalments Part 1—Amendment of the Taxation Administration Act 1953 Part 2—Amendment of the Income Tax Assessment Act 1997 Schedule 25—Value shifting Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Schedule 26—Loss integrity rules: global method of valuing assets Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Schedule 27—Venture capital franking Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Schedule 28—Machinery provisions for simplified imputation system Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 Taxation Administration Act 1953 Schedule 29—Consequential amendments relating to the simplified imputation system Income Tax Assessment Act 1936 Income Tax Assessment Act 1997 Schedule 30—The effect of a cum dividend sale or securities lending arrangement under the simplified imputation system Income Tax Assessment Act 1997 Notes An Act to implement a New Business Tax System, and for related purposes 1 Short title [see Note 1] This Act may be cited as the New Business Tax System (Consolidation and Other Measures) Act 2003. 2 Commencement (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, on the day or at the time specified in column 2 of the table. Commencement information Column 1 Column 2 Column 3 Provision(s) Commencement Date/Details 1. Sections 1 to 4 and anything in this Act not elsewhere covered by this table The day on which this Act receives the Royal Assent 11 April 2003 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 3. Schedule 4 Immediately after the commencement of Schedule 21 to this Act 24 October 2002 4. Schedules 5 to 8 Immediately after the commencement of Schedule 1 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002 24 October 2002 5. Schedule 9 Immediately after the commencement of Schedule 8 to this Act 24 October 2002 6. Schedule 10 Immediately after the commencement of Schedule 9 to this Act 24 October 2002 7. Schedules 11 to 13 Immediately after the commencement of Schedule 1 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002 24 October 2002 8. Schedule 14, item 1 Immediately after the commencement of Schedule 5 to this Act 24 October 2002 9. Schedule 14, items 2 to 12 Immediately after the commencement of Schedule 1 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002 24 October 2002 10. Schedules 15 to 18 Immediately after the commencement of Schedule 1 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002 24 October 2002 11. Schedule 19, items 1 to 6 Immediately after the commencement of Schedule 1 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002 24 October 2002 12. Schedule 19, item 7 Immediately after the time specified in the New Business Tax System (Consolidation) Act (No. 1) 2002 for the commencement of item 34 of Schedule 5 to that Act 24 October 2002 13. Schedules 20 to 23 Immediately after the commencement of Schedule 1 to the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002 24 October 2002 14. Schedule 24 Immediately after the commencement of Schedule 6 to this Act 24 October 2002 15. Schedules 25 to 27 Immediately after the commencement of Schedule 13 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 29 June 2002 16. Schedule 28, item 1 Immediately after the commencement of the New Business Tax System (Imputation) Act 2002 29 June 2002 17. Schedule 28, items 2 to 18 Immediately after the commencement of Schedule 27 to this Act 29 June 2002 18. Schedule 28, subitem 19(1) Immediately after the commencement of the New Business Tax System (Imputation) Act 2002 29 June 2002 19. Schedule 28, subitems 19(2) and (3) Immediately after the commencement of Schedule 27 to this Act 29 June 2002 20. Schedule 29, items 1 to 11 Immediately after the commencement of item 13 of Schedule 29 to this Act 29 June 2002 21. Schedule 29, items 12 and 13 Immediately after the commencement of Schedule 27 to this Act 29 June 2002 22. Schedule 29, item 14 Immediately after the commencement of item 13 of Schedule 29 to this Act 29 June 2002 23. Schedule 30 Immediately after the commencement of Schedule 13 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 29 June 2002 Note: This table relates only to the provisions of this Act as originally passed by the Parliament and assented to. It will not be expanded to deal with provisions inserted in this Act after assent. (2) Column 3 of the table is for additional information that is not part of this Act. This information may be included in any published version of this Act. 3 Schedule(s) Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—Consolidation: amendments of various cost base provisions Part 1—Adjustments to restrict step 4 reduction in allocable cost amount in Subdivision 705‑B and 705‑D cases Income Tax Assessment Act 1997 1 Section 705‑155 Repeal the section, substitute: 705‑155 Adjustments to restrict step 4 reduction of allocable cost amount to effective distributions to head company in respect of direct membership interests Object (1) The object of this section is to ensure that, in working out the group's *allocable cost amount for entities that become *subsidiary members of the group at the formation time, the reduction under step 4 in the table in section 705‑60 (about pre‑formation time distributions out of certain profits) is made only for profits that have been effectively distributed to the *head company in respect of its direct *membership interests in the entities. This ensures consistency with the ordering rule in section 705‑145. When section applies (2) This section applies to a distribution (the subject distribution) to the extent that the following conditions are satisfied: (a) the distribution is made by an entity (the subject entity) that becomes a *subsidiary member of the group at the formation time; (b) in working out the group's *allocable cost amount for the subject entity there would, apart from this section, be a reduction under step 4 in the table in section 705‑60 for the distribution. Step 4 reduction only if subject distribution is made to head company etc. (3) There is no reduction as mentioned in paragraph (2)(b) for the subject distribution unless: (a) the subject distribution is made to the *head company of the group; or (b) the reduction is in accordance with subsection (5). Step 4 reduction for effective distribution to head company (4) If: (a) at the formation time, the *head company of the group has a direct *membership interest in the subject entity; and (b) the head company acquired the membership interest directly from another entity, or indirectly as a result of one or more acquisitions from other entities, where: (i) section 160ZZ0 of the Income Tax Assessment Act 1936 applied to each acquisition; or (ii) there was a roll‑over under Subdivision 126‑B for each acquisition; or a combination of these happened; and (c) while it held the membership interest, the entity, or one of the entities, mentioned in paragraph (b) (the recipient of the further distribution) received a distribution (the further distribution) of some of the subject distribution from the subject entity; the consequences in subsections (5) and (6) apply. Reduction for further distribution that remains with recipient (5) If: (a) the following happen: (i) by the formation time, any of the further distribution (the eligible reduction amount) had not again been distributed by the recipient of the further distribution; (ii) the recipient of the further distribution does not become a *subsidiary member of the group at the formation time; or (b) the following happen: (i) by the formation time, any of the further distribution (the eligible reduction amount) had been distributed by the recipient of the further distribution to another entity directly, or indirectly though successive distributions by interposed entities; (ii) that other entity does not become a subsidiary member of the group at the formation time; or (c) both of the above paragraphs apply; then, in working out the group's *allocable cost amount for the subject entity, the reduction under step 4 in the table in section 705‑60 for the subject distribution only takes place to the extent that it equals the sum of all eligible reduction amounts. Step 1 reduced cost base adjustment to reverse effect of reduction for further distribution (6) Also, if subsection 160ZK(5) of the Income Tax Assessment Act 1936 or subsection 110‑55(7) of this Act applied to the further distribution, then for the purposes of step 1 in the table in section 705‑60 in working out the group's *allocable cost amount for the subject entity: (a) the reference in subsection 705‑65(3) to a reduction resulting from the application of subsection 160ZK(5) of the Income Tax Assessment Act 1936; and (b) the reference in subsection 705‑65(5) to a reduction that has taken place under subsection 110‑55(7); include a reference to the reduction in the *reduced cost base of the membership interest in the subject entity resulting from the application of subsection 160ZK(5) of the Income Tax Assessment Act 1936, or subsection 110‑55(7) of this Act, to the further distribution. 2 Section 705‑230 Repeal the section, substitute: 705‑230 Adjustments to restrict step 4 reduction of allocable cost amount to effective distributions to head company in respect of direct membership interests Object (1) The object of this section is to ensure that, in working out the group's *allocable cost amount for the linked entities, the reduction under step 4 in the table in section 705‑60 (about pre‑formation time distributions out of certain profits) is made only for profits that have been effectively distributed to the *head company in respect of its direct *membership interests in the entities. This ensures consistency with the ordering rule in section 705‑225. When section applies (2) This section applies to a distribution to the extent that the following conditions are satisfied: (a) the distribution is made by a linked entity; (b) in working out the group's *allocable cost amount for the linked entity there would, apart from this section, be a reduction under step 4 in the table in section 705‑60 for the distribution. Step 4 reduction only if subject distribution is made to head company (3) There is no reduction as mentioned in subsection (2) for the distribution unless it is made to the *head company of the group. Part 2—Consequential amendments relating to simplified imputation system Income Tax Assessment Act 1997 3 Section 705‑60 (table item 3, column headed "What the step requires") Omit "frankable", substitute "taxed". 4 Subsection 705‑90(3) Repeal the subsection, substitute: Extent to which tax paid on undistributed profits (3) Then work out how much of the undistributed profits does not exceed the amount worked out using the following formula as at the joining time: 5 Section 705‑90 (heading) Repeal the heading, substitute: 705‑90 Undistributed, taxed profits accruing to joined group before joining time—step 3 in working out allocable cost amount 6 Paragraph 705‑90(6)(a) Omit ", if they had been distributed as dividends at the joining time, could have been so franked", substitute "satisfy the requirements of subsection (3)". Income Tax (Transitional Provisions) Act 1997 7 Subsection 701‑30(2) Omit "unfrankable", substitute "untaxed". Note: The heading to section 701‑30 is altered by omitting "unfrankable" and substituting "untaxed". 8 Subsection 701‑30(4) Omit "unfrankable", substitute "untaxed". Part 3—Changes to tax cost setting amount in Subdivision 705‑B and 705‑D cases to take account of steps 3 and 5 of allocable cost amount Income Tax Assessment Act 1997 9 Section 705‑160 Repeal the section, substitute: 705‑160 Adjustment to allocation of allocable cost amount to take account of owned profits or losses of certain entities that become subsidiary members Object (1) The object of this section is to prevent a distortion under section 705‑35 in the allocation of *allocable cost amount to an entity that becomes a *subsidiary member of the group where that entity has direct or indirect *membership interests in another entity that has certain profits or tax losses when it becomes a subsidiary member. Adjustment to allocation of allocable cost amount where direct interest in entity with profits/losses (2) If: (a) an entity becomes a *subsidiary member of the group at the formation time; and (b) the entity has *membership interests in a second entity that becomes a subsidiary member of the group at that time; and (c) in working out the group's *allocable cost amount for the second entity: (i) an amount is required to be added (the second entity's profit/loss adjustment amount) under step 3 in the table in section 705‑60 (about profits accruing before becoming a subsidiary member of the group); or (ii) an amount is required to be subtracted (also the second entity's profit/loss adjustment amount) under step 5 in the table in section 705‑60 (about losses accruing before becoming a subsidiary member of the group); then, for the purposes of working out under section 705‑35 the *tax cost setting amount for the assets of the first entity, the *market value of the first entity's membership interests in the second entity is reduced (in a subparagraph (c)(i) case) or increased (in a subparagraph (c)(ii) case) by the first entity's interest in the second entity's profit/loss adjustment amount (see subsection (3)). First entity's interest in second entity's profit/loss adjustment amount (3) The first entity's interest in the second entity's profit/loss adjustment amount is worked out using the formula: Adjustment to allocation of allocable cost amount for indirect interest in entity with profits/losses (4) If: (a) an entity becomes a *subsidiary member of the group at the formation time; and (b) the entity has *membership interests in a second entity that becomes a subsidiary member of the group at that time; and (c) the second entity has, directly or indirectly through one or more interposed entities that become subsidiary members of the group at the formation time, membership interests in a third entity that becomes a subsidiary member of the group at that time; and (d) in working out the group's *allocable cost amount for the third entity: (i) an amount is required to be added (the third entity's profit/loss adjustment amount) under step 3 in the table in section 705‑60 (about profits accruing before becoming a subsidiary member of the group); or (ii) an amount is required to be subtracted (also the third entity's profit/loss adjustment amount) under step 5 in the table in section 705‑60 (about losses accruing before becoming a subsidiary member of the group); then, for the purposes of working out under section 705‑35 the *tax cost setting amount for the assets of the first entity, the *market value of the first entity's membership interests in the second entity is reduced (in a subparagraph (d)(i) case) or increased (in a subparagraph (d)(ii) case) by the first entity's interest in the third entity's profit/loss adjustment amount (see subsection (5)). First entity's interest in third entity's profit/loss adjustment amount (5) The first entity's interest in the third entity's profit/loss adjustment amount is worked out using the formula: where: market value of first entity's membership interests in third entity held through second entity means the *market value of all *membership interests in the third entity that the first entity holds indirectly through the second entity (including through that entity and one or more other entities that become *subsidiary members of the group and are interposed between the second entity and the third entity). 10 Section 705‑235 Repeal the section, substitute: 705‑235 Adjustment to allocation of allocable cost amount to take account of owned profits or losses of certain linked entities Object (1) The object of this section is to prevent a distortion under section 705‑35 in the allocation of *allocable cost amount to a linked entity where that entity has direct or indirect *membership interests in another linked entity that has certain profits or tax losses. Adjustment to allocation of allocable cost amount where direct interest in linked entity with profits/losses (2) If: (a) a linked entity has *membership interests in a second linked entity; and (b) in working out the group's *allocable cost amount for the second linked entity: (i) an amount is required to be added (the second linked entity's profit/loss adjustment amount) under step 3 in the table in section 705‑60 (about profits accruing before becoming a subsidiary member of the group); or (ii) an amount is required to be subtracted (also the second linked entity's profit/loss adjustment amount) under step 5 in the table in section 705‑60 (about losses accruing before becoming a subsidiary member of the group); then, for the purposes of working out under section 705‑35 the *tax cost setting amount for the assets of the first linked entity, the *market value of the first linked entity's membership interests in the second linked entity is reduced (in a subparagraph (b)(i) case) or increased (in a subparagraph (b)(ii) case) by the first linked entity's interest in the second linked entity's profit/loss adjustment amount (see subsection (3)). First linked entity's interest in second linked entity's profit/loss adjustment amount (3) The first linked entity's interest in the second linked entity's profit/loss adjustment amount is worked out using the formula: Adjustment to allocation of allocable cost amount for indirect interest in linked entity with profits/losses (4) If: (a) a linked entity has *membership interests in a second linked entity; and (b) the second linked entity has, directly or indirectly through one or more interposed linked entities, membership interests in a third linked entity; and (c) in working out the group's *allocable cost amount for the third linked entity: (i) an amount is required to be added (the third linked entity's profit/loss adjustment amount) under step 3 in the table in section 705‑60 (about profits accruing before becoming a subsidiary member of the group); or (ii) an amount is required to be subtracted (also the third linked entity's profit/loss adjustment amount) under step 5 in the table in section 705‑60 (about losses accruing before becoming a subsidiary member of the group); then, for the purposes of working out under section 705‑35 the *tax cost setting amount for the assets of the first linked entity, the *market value of the first linked entity's membership interests in the second linked entity is reduced (in a subparagraph (c)(i) case) or increased (in a subparagraph (c)(ii) case) by the first linked entity's interest in the third linked entity's profit/loss adjustment amount (see subsection (5)). First linked entity's interest in third linked entity's profit/loss adjustment amount (5) The first linked entity's interest in the third linked entity's profit/loss adjustment amount is worked out using the formula: where: market value of first linked entity's membership interests in third linked entity held through second linked entity means the *market value of all *membership interests in the third linked entity that the first linked entity holds indirectly through the second linked entity (including through that entity and one or more other linked entities that are interposed between the second linked entity and the third linked entity). Part 4—Adjustment to allocable cost amount for certain pre‑joining time roll‑overs from foreign residents Income Tax Assessment Act 1997 11 Section 705‑60 (after table item 3) Insert: 3A For each step 3A amount (if any) under section 705‑93 (which is about pre‑joining time intra‑group roll‑overs from foreign resident companies): To adjust for certain intra‑group roll‑overs from foreign companies before the joining time (a) if the step 3A amount is an increase amount under that section—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 reduction amount under that section—subtract from the result of step 3 (as affected by any previous application of this step) the step 3A amount 12 Section 705‑60 (table item 4, column headed "What the step requires") Omit "step 3", substitute "step 3A". 13 At the end of section 705‑60 Add: Note: The head company may be taken to have made a capital gain, depending on the amount remaining after applying step 3A: see CGT event L2. 14 After section 705‑90 Insert: 705‑93 If pre‑joining time roll‑over from foreign resident company—step 3A in working out allocable cost amount When there is a step 3A amount (1) For the purposes of step 3A in the table in section 705‑60, there is a step 3A amount if: (a) before the joining time: (i) there was a roll‑over under Subdivision 126‑B (a Subdivision 126‑B roll‑over) in relation to a *CGT event that happened in relation to an asset (the roll‑over asset); or (ii) section 160ZZO of the Income Tax Assessment Act 1936 applied in relation to a disposal (a section 160ZZO roll‑over) of an asset (also the roll‑over asset); and (b) the originating company in relation to the Subdivision 126‑B roll‑over, or the transferor in relation to the section 160ZZO roll‑over, was a foreign resident; and (c) the recipient company in relation to the Subdivision 126‑B roll‑over, or the transferee in relation to the section 160ZZO roll‑over, was an Australian resident and was not the entity that became the *head company of the joined group; and (d) between the Subdivision 126‑B roll‑over, or the section 160ZZO roll‑over, and the joining time, no other CGT event happened in relation to the roll‑over asset for which there was not a Subdivision 126‑B roll‑over or a section 160ZZO roll‑over; and (e) the roll‑over asset is not a *pre‑CGT asset at the joining time; and (f) the roll‑over asset becomes that of the head company of the joined group because subsection 701‑1(1) (the single entity rule) applies when the joining entity becomes a *subsidiary member of the group. What the step 3A amount is (2) The step 3A amount is: (a) if, as a result of the Subdivision 126‑B roll‑over mentioned in subparagraph (1)(a)(i), or the section 160ZZO roll‑over mentioned in subparagraph (1)(a)(ii), a *capital loss of the originating company was disregarded or a capital loss of the transferor was not incurred—an increase amount equal to the capital loss; or (b) if, as a result of the Subdivision 126‑B roll‑over mentioned in subparagraph (1)(a)(i), or the section 160ZZO roll‑over mentioned in subparagraph (1)(a)(ii), a *capital gain of the originating company was disregarded or a capital gain of the transferor did not accrue—a reduction amount equal to the capital gain. 15 After section 705‑145 Insert: 705‑147 Adjustment in working out step 3A of allocable cost amount to take account of membership interests held by subsidiary members in other such members Object (1) The object of this section is to modify the effect that section 705‑93 (step 3A of allocable cost amount) has in accordance with this Subdivision so that it takes account of *membership interests that entities that become *subsidiary members hold in other such entities. Apportionment of step 3A amount among first level interposed entities (2) If: (a) under section 705‑93, in its application in accordance with this Subdivision, there is a step 3A amount for the purpose of working out the group's *allocable cost amount for an entity (the subject entity) that becomes a *subsidiary member of the group at the formation time; and (b) at that time one or more entities (the first level entities), that become subsidiary members of the group and in which the *head company holds *membership interests, are interposed between the head company and the subject entity; then the step 3A amount is apportioned among the first level entities and the subject entity on the following basis: (c) each first level entity has the following proportion of the step 3A amount: where: market value of all membership interests in subject entity means the *market value, at the formation time, of all *membership interests in the subject entity that are held by entities that become *members of the group at that time. market value of first level entity's direct and indirect membership interests in subject entity means so much of the market value of all membership interests in the subject entity (as defined above) as is attributable to *membership interests that the first level entity holds directly, or indirectly through other interposed entities that become *subsidiary members of the group at the formation time; and (d) the subject entity has the remainder of the step 3A amount. Step 3A amount for assets consisting of membership interests held by subsidiary members in other subsidiary members (3) If: (a) before the formation time: (i) there was a roll‑over under Subdivision 126‑B (a Subdivision 126‑B roll‑over) in relation to a *CGT event that happened in relation to an asset (the roll‑over asset); or (ii) section 160ZZO of the Income Tax Assessment Act 1936 applied in relation to a disposal (a section 160ZZO roll‑over) of an asset (also the roll‑over asset); and (b) the originating company in relation to the Subdivision 126‑B roll‑over, or the transferor in relation to the section 160ZZO roll‑over, was a foreign resident; and (c) the recipient company in relation to the Subdivision 126‑B roll‑over, or the transferee in relation to the section 160ZZO roll‑over, was an Australian resident and was not the entity that became the *head company of the group; and (d) between the Subdivision 126‑B roll‑over, or the section 160ZZO roll‑over, and the formation time, no other CGT event happened in relation to the roll‑over asset for which there was not a Subdivision 126‑B roll‑over or a section 160ZZO roll‑over; and (e) the roll‑over asset is a *membership interest in an entity that becomes a *subsidiary member at the formation time, other than one that is held at that time by the entity that becomes the head company of the group; then, subject to subsection (5), there is under section 705‑93 a step 3A amount for the purpose of working out the group's *allocable cost amount for the entity (the subject entity) that holds the roll‑over asset at the formation time. What the step 3A amount is (4) The step 3A amount is: (a) if, as a result of the Subdivision 126‑B roll‑over mentioned in subparagraph (3)(a)(i), or the section 160ZZO roll‑over mentioned in subparagraph (3)(a)(ii), a *capital loss of the originating company was disregarded or a capital loss of the transferor was not incurred—an increase amount equal to the capital loss; or (b) if, as a result of the Subdivision 126‑B roll‑over mentioned in subparagraph (3)(a)(i), or the section 160ZZO roll‑over mentioned in subparagraph (3)(a)(ii), a *capital gain of the originating company was disregarded or a capital gain of the transferor did not accrue—a reduction amount equal to the capital gain. Apportionment of step 3A amount among first level interposed entities (5) If at the formation time one or more entities, that become *subsidiary members of the group and in which the *head company holds *membership interests, are interposed between the head company and the subject entity, then the step 3A amount is apportioned among those entities and the subject entity in the same way as a step 3A amount is apportioned under subsection (2). 16 Section 705‑150 (heading) Repeal the heading, substitute: 705‑150 Adjustment to result of step 3A in working out allocable cost amount where pre‑formation time roll‑over from head company to member of wholly‑owned group 17 Subsection 705‑150(3) (heading) Repeal the heading, substitute: Adjustment to result of step 3A in allocable cost amount for head company roll‑over recipient 18 Subsection 705‑150(3) Omit "step 3", substitute "step 3A". 19 Subsection 705‑150(4) (heading) Repeal the heading, substitute: Adjustment to result of step 3A in allocable cost amount for interposed entity 20 Subsection 705‑150(4) Omit "step 3", substitute "step 3A". 21 Subsection 705‑150(4) (note) Repeal the note, substitute: Note: If, after applying this section, the amount remaining as a result of step 3A in the table in section 705‑60 is negative, the head company makes a capital gain equal to that amount: see CGT event L2. 22 After section 705‑225 Insert: 705‑227 Adjustment in working out step 3A of allocable cost amount to take account of membership interests held by linked entities in other linked entities Object (1) The object of this section is to modify the effect that section 705‑93 (step 3A of allocable cost amount) has in accordance with this Subdivision so that it takes account of *membership interests that linked entities hold in other linked entities at the time (the linked entity joining time) when the linked entities become *subsidiary members of the group. Apportionment of step 3A amount among first level interposed entities (2) If: (a) under section 705‑93, in its application in accordance with this Subdivision, there is a step 3A amount for the purpose of working out the group's *allocable cost amount for a particular linked entity (the subject entity); and (b) at the linked entity joining time, one or more of the linked entities (the first level entities) in which the *head company holds *membership interests are interposed between the head company and the subject entity; then the step 3A amount is apportioned among the first level entities and the subject entity on the following basis: (c) each first level entity has the following proportion of the step 3A amount: where: market value of all membership interests in subject entity means the *market value, at the linked entity joining time, of all *membership interests in the subject entity that are held by entities that become *members of the group at that time. market value of first level entity's direct and indirect membership interests in subject entity means so much of the market value of all membership interests in the subject entity (as defined above) as is attributable to *membership interests that the first level entity holds directly, or indirectly through other linked entities; and (d) the subject entity has the remainder of the step 3A amount. Step 3A amount for assets consisting of membership interests held by linked entities in other linked entities (3) If: (a) before the linked entity joining time: (i) there was a roll‑over under Subdivision 126‑B (a Subdivision 126‑B roll‑over) in relation to a *CGT event that happened in relation to an asset (the roll‑over asset); or (ii) section 160ZZO of the Income Tax Assessment Act 1936 applied in relation to a disposal (a section 160ZZO roll‑over) of an asset (also the roll‑over asset); and (b) the originating company in relation to the Subdivision 126‑B roll‑over, or the transferor in relation to the section 160ZZO roll‑over, was a foreign resident; and (c) the recipient company in relation to the Subdivision 126‑B roll‑over, or the transferee in relation to the section 160ZZO roll‑over, was an Australian resident and was not the entity that became the *head company of the group; and (d) between the Subdivision 126‑B roll‑over, or the section 160ZZO roll‑over, and the linked entity joining time, no other CGT event happened in relation to the roll‑over asset for which there was not a Subdivision 126‑B roll‑over or a section 160ZZO roll‑over; and (e) the roll‑over asset is a *membership interest in a linked entity, other than one that is held at that time by the entity that becomes the head company of the group; then, subject to subsection (5), there is under section 705‑93 a step 3A amount for the purpose of working out the group's *allocable cost amount for the linked entity (the subject entity) that holds the roll‑over asset at the linked entity joining time. What the step 3A amount is (4) The step 3A amount is: (a) if, as a result of the Subdivision 126‑B roll‑over mentioned in subparagraph (3)(a)(i), or the section 160ZZO roll‑over mentioned in subparagraph (3)(a)(ii), a *capital loss of the originating company was disregarded or a capital loss of the transferor was not incurred—an increase amount equal to the capital loss; or (b) if, as a result of the Subdivision 126‑B roll‑over mentioned in subparagraph (3)(a)(i), or the section 160ZZO roll‑over mentioned in subparagraph (3)(a)(ii), a *capital gain of the originating company was disregarded or a capital gain of the transferor did not accrue—a reduction amount equal to the capital gain. Apportionment of step 3A amount among first level interposed entities (5) If at the linked entity joining time one or more linked entities, in which the *head company holds *membership interests, are interposed between the head company and the subject entity, then the step 3A amount is apportioned among those entities and the subject entity in the same way as a step 3A amount is apportioned under subsection (2). Part 5—Technical corrections Income Tax Assessment Act 1997 23 Subsection 701‑25(4) Omit ", and", substitute "and". 24 Subsection 701‑45(3) Omit "*head company", substitute "entity". 25 Subparagraph 701‑75(3)(a)(ii) Omit "time.", substitute "time; and". 26 Subsections 705‑150(3) and (4) Omit "reduced (if the head company roll‑over adjustment amount is an excess), or increased", substitute "increased (if the head company roll‑over adjustment is an excess), or reduced". Part 6—Extension of transitional provision relating to step 3 of allocable cost amount on group formation Income Tax (Transitional Provisions) Act 1997 27 Subsection 701‑30(1) Repeal the subsection, substitute: Section only applies to transitional groups formed at certain times (1) This section applies if the day on which the transitional group comes into existence is before 1 July 2003 or is both: (a) the first day of the first income year of the head company starting after 30 June 2003; and (b) before 1 July 2004. Section only applies to non‑chosen transitional entities in such groups (1A) This section applies to each transitional entity in the transitional group, other than a chosen transitional entity. This is so even if there are no chosen transitional entities at all. 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 Part 7—Transitional group's allocable cost amount for subsidiary members other than chosen transitional entities Income Tax (Transitional Provisions) Act 1997 28 Paragraph 701‑20(5)(c) Omit "in the sub‑group held in any other", substitute "held at or before that time in any other entity that became a". 29 Paragraph 701‑20(5)(c) After "in relation to the sub‑group", insert ", and any such entity held those membership interests during the period when it actually held them". Part 8—Inclusion in certain transitional provisions of references to the Income Tax Assessment Act 1997 Income Tax (Transitional Provisions) Act 1997 30 Subsection 701‑5(2) After "703‑50(3)", insert "of the Income Tax Assessment Act 1997". 31 Subsection 701‑5(2) After "section 703‑50", insert "of that Act". 32 Section 701‑15 After "amount)", insert "of the Income Tax Assessment Act 1997". 33 Section 701‑15 (note) After "701‑5", insert "of that Act". 34 Paragraph 701‑20(4)(b) After "705‑60", insert "of the Income Tax Assessment Act 1997". 35 Paragraph 701‑20(5)(d) After "705‑60", insert "of the Income Tax Assessment Act 1997". 36 Section 701‑25 Omit "this Act", substitute "the Income Tax Assessment Act 1997". Schedule 2—Consolidation: beneficial ownership Income Tax Assessment Act 1997 1 After section 703‑30 Insert: 703‑33 Transfer time for sale of shares in company (1) This section applies if: (a) under a contract: (i) a person (the seller) stops being entitled to be registered as the holder of a *share in a company at a time (the transfer time); and (ii) another person (the buyer) becomes entitled to be registered as the holder of the share in the company at the transfer time; and (b) as a result of the contract, the seller stops being the beneficial owner of the share, and the buyer becomes the beneficial owner of the share; and (c) the seller and the buyer dealt with each other at *arm's length in relation to the contract; and (d) the seller and the buyer were not *associates of one another at any time during the period: (i) starting when the contract was entered into; and (ii) ending at the transfer time. (2) For the purposes of subsection 703‑30(1): (a) the seller is taken to have stopped being the beneficial owner of the share at the transfer time; and (b) the buyer is taken to have become the beneficial owner of the share at the transfer time. Schedule 3—Consolidation: technical amendment of membership rules Income Tax Assessment Act 1997 1 Subparagraph 703‑50(3)(b)(i) Omit "first income year ending after the day specified in the choice", substitute "income year during which the day specified in the choice occurs". Schedule 4—Consolidation: adjustments for errors etc. Part 1—New Subdivision 705‑E Income Tax Assessment Act 1997 1 Section 705‑245 (link note) Repeal the link note. 2 After Subdivision 705‑D Insert: Subdivision 705‑E—Adjustments for errors etc. Guide to Subdivision 705‑E 705‑300 What this Subdivision is about Errors in making tax cost setting amount calculations are reversed by means of an immediate capital gain or loss if it would be unreasonable to require the calculations to be re‑done. Table of sections Operative provisions 705‑305 Object of this Subdivision 705‑310 Operation of Part IVA of the Income Tax Assessment Act 1936 705‑315 Errors that attract special adjustment action 705‑320 Tax cost setting amounts taken to be correct [This is the end of the Guide.] Operative provisions 705‑305 Object of this Subdivision The object of this Subdivision is to avoid the time and expense involved in correcting errors affecting *tax cost setting amount calculations. This is done by providing for *capital gains or *capital losses to reverse the errors. 705‑310 Operation of Part IVA of the Income Tax Assessment Act 1936 To avoid doubt, this Subdivision does not limit the operation of Part IVA of the Income Tax Assessment Act 1936. 705‑315 Errors that attract special adjustment action (1) Section 705‑320 (about later adjustments to correct *tax cost setting amount calculation errors) applies if the conditions in this section are satisfied. Tax cost setting amount taken into account (2) The first condition is that the *head company of a *consolidated group worked out a *tax cost setting amount, in purported compliance with this Division, for an asset of an entity that becomes a *subsidiary member of the group that is an asset of a kind referred to in section 705‑35 as a reset cost base asset. Error in calculation (3) The second condition is that: (a) the *head company made one or more errors in working out the *tax cost setting amount; and (b) those errors caused the tax cost setting amount to differ from its correct amount. If the errors caused the tax cost setting amount to be more, the difference is an overstated amount. If the errors caused the tax cost setting amount to be less, the difference is an understated amount. Unreasonable to require recalculation (4) The third condition is that, having regard to the following factors: (a) the net size of the errors compared to the size of the *allocable cost amount for the joining entity; (b) the number of *tax cost setting amounts that would have to be recalculated, and the difficulty of making the recalculations; (c) the number of adjustments, in assessments that could be amended and in future *income tax returns, that would be necessary to correct the errors; (d) the difficulty in obtaining any necessary information; it is not reasonable to require a recalculation of the amounts involved. Exception where error due to fraud or evasion (5) However, the conditions in this section are not satisfied if the errors were to any extent due to fraud or evasion. Requirement to notify (6) The *head company of the *consolidated group must, as soon as practicable after becoming aware that it made one or more errors in working out the *tax cost setting amount, notify the Commissioner in the *approved form: (a) that it had made the errors; and (b) of the amount of the overstated amount or understated amount. 705‑320 Tax cost setting amounts taken to be correct (1) For the purposes of this Act (other than this Subdivision) and for the purposes of the Taxation Administration Act 1953, any *tax cost setting amounts that were worked out by the *head company, so far as they were due to the errors, are taken to have been correct if the conditions in section 705‑315 are satisfied. Note 1: If the conditions in section 705‑315 are satisfied, CGT event L6 happens (see section 104‑525). Note 2: Subsection (1) means that the Commissioner cannot amend any assessments necessary to correct the errors, and that (except as mentioned in subsection (2)) no offences or administrative penalties arise in respect of the errors. (2) Subsection (1) does not apply for the purposes of determining whether there is an offence against section 8N of the Taxation Administration Act 1953, or an administrative penalty under section 284‑75 or 284‑145 in Schedule 1 to that Act, in relation to statements made before the Commissioner became aware of the errors. Note 1: Section 8N of the Taxation Administration Act 1953 deals with false or misleading statements. Sections 284‑75 and 284‑145 in Schedule 1 to that Act set out the circumstances in which an entity is liable for an administrative penalty. Note 2: The offence and administrative penalty provisions however apply on a modified basis—see subsection 8W(1C) of the Taxation Administration Act 1953, and subsections 284‑80(2) and 284‑150(2) in Schedule 1 to that Act. [The next Division is Division 707.] Part 2—Consequential amendments Income Tax Assessment Act 1997 3 Section 104‑5 (at the end of the table) Add: L6 Error in calculation of tax cost setting amount for joining entity's assets: CGT event L6 start of the income year when the Commissioner becomes aware of the errors the net overstated amount resulting from the errors, or a portion of that amount the net understated amount resulting from the errors, or a portion of that amount [See section 104‑525] L7 Discharged amount of liability differs from amount for allocable cost amount purposes: CGT event L7 start of the income year in which the liability is realised your allocable cost amount less what it would have been had you used the correct amount for the liability what your allocable cost amount would have been had you used the correct amount for the liability less your allocable cost amount [See section 104‑530] 4 At the end of Division 104 Add: 104‑525 Error in calculation of tax cost setting amount for joining entity's assets: CGT event L6 (1) CGT event L6 happens if: (a) you are the *head company of a *consolidated group; and (b) the conditions in section 705‑315 (about errors in tax cost setting amounts) are satisfied for a *subsidiary member of the group; and (c) you have a *net overstated amount or a *net understated amount for the subsidiary member. (2) The time of the event is the start of the income year in which the Commissioner becomes aware of the errors. (3) You work out whether you have a net overstated amount or net understated amount using this table: Meaning of net overstated amount and net understated amount Item In this situation: There is this result: 1 There are one or more overstated amounts under section 705‑315 for the *subsidiary member but no understated amount under that section for the subsidiary member There is a net overstated amount. It is the overstated amount, or the sum of the overstated amounts. 2 There are one or more understated amounts under section 705‑315 for the *subsidiary member but no overstated amount under that section for the subsidiary member There is a net understated amount. It is the understated amount, or the sum of the understated amounts. 3 There are both one or more overstated amounts and one or more understated amounts under section 705‑315 for the *subsidiary member and the sum of the overstated amounts exceeds the sum of the understated amounts There is a net overstated amount. It is the difference between those sums 4 There are both one or more overstated amounts and one or more understated amounts under section 705‑315 for the *subsidiary member and the sum of the overstated amounts is less than the sum of the understated amounts There is a net understated amount. It is the difference between those sums (4) If the time when the Commissioner becomes aware of the errors is within the period within which the Commissioner may amend all of the assessments necessary to correct the errors, then, for the head company core purposes mentioned in subsection 701‑1(2): (a) if you have a *net overstated amount—you make a capital gain equal to that amount; or (b) if you have a *net understated amount—you make a capital loss equal to that amount. (5) If the time when the Commissioner becomes aware of the errors is not within that period, then, for the head company core purposes mentioned in subsection 701‑1(2): (a) if you have a *net overstated amount—you make a capital gain of the amount worked out under subsection (6); or (b) if you have a *net understated amount—you make a capital loss of the amount worked out under subsection (6). (6) The amount of the *capital gain or *capital loss is worked out as follows: where: current asset setting amount means the *tax cost setting amount for all assets referred to in subsection 705‑315(2) as reset cost base assets that the *head company of the *consolidated group held continuously from the time when the *subsidiary member joined the group until the start of the head company's income year that is the earliest income year for which the Commissioner could amend the head company's assessment to correct any of the errors. original asset setting amount means the *tax cost setting amount for all assets referred to in subsection 705‑315(2) as reset cost base assets that the *subsidiary member held at the time it joined the group. stated amount means the *net overstated amount or the *net understated amount, as the case requires. 104‑530 Discharged amount of liability differs from amount for allocable cost amount purposes: CGT event L7 (1) CGT event L7 happens if you are the *head company of a *consolidated group and the conditions relating to a liability in subsection (3) are satisfied. (2) The time of the event is the start of your income year in which the liability is discharged. (3) The conditions are that: (a) a liability of an entity that became a *subsidiary member of the group was taken into account in working out your *allocable cost amount for the subsidiary member in accordance with Division 705 (your ACA); and (b) the liability was later discharged (whether by the making of a payment or by the release, waiver or other extinguishment of the liability) and the sum (the realised amount) of: (i) the amount of any payment made to discharge the liability; and (ii) the market value of any other consideration given to discharge the liability; differs from the amount for the liability that was taken into account in working out your ACA; and (c) that ACA is different to what it would have been (your true ACA) if you had taken the realised amount into account in working out your ACA. (4) You make a capital gain for the head company core purposes mentioned in subsection 701‑1(2) if your ACA would have been smaller had you used the realised amount in working out your ACA. The amount of the gain is the difference between the amount you worked out and your true ACA. (5) You make a capital loss for the head company core purposes mentioned in subsection 701‑1(2) if your ACA would have been greater had you used the realised amount in working out your ACA. The amount of the loss is the difference between the amount you worked out and your true ACA. 5 Section 110‑10 (at the end of the table) Add: L6 Errors in tax cost setting amounts for entity joining consolidated group 104‑525 L7 Discharged amount of liability differs from amount for allocable cost amount purposes 104‑530 6 Subsection 995‑1(1) Insert: net overstated amount has the meaning given by subsection 104‑525(3). 7 Subsection 995‑1(1) Insert: net understated amount has the meaning given by subsection 104‑525(3). Taxation Administration Act 1953 8 After subsection 8W(1B) Insert: (1C) If the conditions in section 705‑315 of the Income Tax Assessment Act 1997 are satisfied, then for the purposes of any application of subsection (1) of this section in relation to the errors mentioned in that section, so far as they were made in a statement made as mentioned in subsection 705‑230(2) of that Act, the references in paragraphs (1)(c) and (d) of this section to the excess are taken instead to be references to the amount worked out using the formula: where: adjusted reset cost base asset setting amount means: (a) the *tax cost setting amount, worked out under Division 705 of the Income Tax Assessment Act 1997, for all assets of a kind referred to in section 705‑35 of that Act as reset cost base assets that the *head company of the relevant group held continuously from the time when the *subsidiary member referred to in subsection 705‑315(2) of that Act joined the group until the start of the head company's income year in which the Commissioner became aware of the errors mentioned in section 705‑315 of that Act; less: (b) the head company's deductions under Division 40 (except under Subdivision 40‑F, 40‑G, 40‑H or 40‑I) or Subdivision 328‑D of the Income Tax Assessment Act 1997 for those assets for all income years before the earliest income year for which the Commissioner could amend the head company's assessment to correct any of the errors. capital gain means the capital gain that the head company makes as a result of CGT event L6 happening as mentioned in section 104‑525 of the Income Tax Assessment Act 1997. original reset cost base asset setting amount means the *tax cost setting amount, worked out under Division 705 of the Income Tax Assessment Act 1997, for all reset cost base assets that the *subsidiary member held at the time it joined the group, other than assets that the *head company no longer held at the start of the earliest income year for which the Commissioner could amend the head company's assessment to correct any of the errors. 9 At the end of section 284‑80 in Schedule 1 Add: (2) However, if: (a) your shortfall amount arises in the situation covered by both item 1 in the table and item 1, 2 or 3 in the table in subsection 284‑90(1); and (b) the statement is false or misleading because of errors mentioned in section 705‑315 of the Income Tax Assessment Act 1997 that were made in the income tax return mentioned in subsection 705‑230(2) of that Act, your shortfall amount is instead the amount worked out using the formula: where: adjusted reset cost base asset setting amount means: (a) the *tax cost setting amount, worked out under Division 705 of the Income Tax Assessment Act 1997, for all assets of a kind referred to in section 705‑35 of that Act as reset cost base assets that the *head company of the relevant group held continuously from the time when the *subsidiary member referred to in subsection 705‑315(2) of that Act joined the group until the start of the head company's income year in which the Commissioner became aware of the errors mentioned in section 705‑315 of that Act; less: (b) the head company's deductions under Division 40 (except under Subdivision 40‑F, 40‑G, 40‑H or 40‑I) or Subdivision 328‑D of the Income Tax Assessment Act 1997 for those assets for all income years before the income year in which the Commissioner became aware of the errors. capital gain means the capital gain that the head company makes as a result of CGT event L6 happening as mentioned in section 104‑525 of the Income Tax Assessment Act 1997. original reset cost base asset setting amount means the *tax cost setting amount, worked out under Division 705 of the Income Tax Assessment Act 1997, for all reset cost base assets that the *subsidiary member held at the time it joined the group, other than assets that the *head company no longer held at the start of the earliest income year for which the Commissioner could amend the head company's assessment to correct any of the errors. 10 At the end of section 284‑150 in Schedule 1 Add: (3) However, to the extent that your scheme shortfall amount is due to errors in an income tax return as mentioned in subsection 705‑230(2) of the Income Tax Assessment Act 1997, your scheme shortfall amount is instead the amount worked out using the formula: where: adjusted reset cost base asset setting amount means: (a) the *tax cost setting amount, worked out under Division 705 of the Income Tax Assessment Act 1997, for all assets of a kind referred to in section 705‑35 of that Act as reset cost base assets that the *head company of the relevant group held continuously from the time when the *subsidiary member referred to in subsection 705‑315(2) of that Act joined the group until the start of the head company's income year in which the Commissioner became aware of the errors mentioned in section 705‑315 of that Act; less: (b) the head company's deductions under Division 40 (except under Subdivision 40‑F, 40‑G, 40‑H or 40‑I) or Subdivision 328‑D of the I