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Yes. Subsection 711-45(4) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the amount of an intra-group liability for the purpose of applying subsection 711-45(1) is the market value of the corresponding asset of the member of the group at the time of deregistration.

When the final Determination is issued, it is proposed to apply both before and after its date of issue. However, the Determination will not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of the Determination.

Taxation Determination TD 2006/59 [1] explains that the unsatisfied debts of a subsidiary at the time of deregistration are recognised as accounting liabilities under subsection 711-45(1) of the ITAA 1997 because, in accordance with accounting standards and statements of accounting concepts made by the Australian Accounting Standards Board (AASB), they are liabilities of the subsidiary at the leaving time that can or must be identified in the subsidiary's statement of financial position.

Where a liquidated subsidiary has an outstanding liability to another member of the consolidated group at the time of its deregistration, it is likely that the corresponding asset of the other member will have little or no value. [2] If the market value of the corresponding asset is nil then, in accordance with section 711-45 of the ITAA 1997, there will be no amount subtracted for that intra-group liability under step 4 in the table in subsection 711-20(1) of the ITAA 1997. If the liquidated subsidiary has no other unsatisfied liabilities, the amount remaining after step 4 will not be negative and the head company will not be taken to have made a capital gain under CGT event L5.

We invite you to comment on this draft Taxation Determination. Please forward your comments to the contact officer by the due date. (Note: The Tax Office prepares a compendium of comments for the consideration of the relevant Rulings Panel. The Tax Office may use a sanitised version (names and identifying information removed) of the compendium in providing its responses to persons providing comments. Please advise if you do not want your comments included in a sanitised compendium.) Due date: 27 October 2006 Contact officer details have been removed following publication of the final ruling.