11 September 2017

Consultation on Consolidation Integrity Measures

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, today released draft tax consolidation legislation and an explanatory memorandum for public consultation.

These important measures restore integrity to the tax consolidation rules, making sure they are operating as intended and providing appropriate tax outcomes. They continue the work of the Turnbull Government in strengthening our corporate tax system.

The tax consolidation rules allow wholly owned groups to choose to form a ‘consolidated group’ for tax purposes, which is treated as a single entity for tax purposes.

The Bill contains six measures designed to remove anomalous tax outcomes that arise under the tax cost setting rules when an entity leaves or joins a tax consolidated group. These measures:

  • prevent a double benefit from arising in relation to deductible liabilities when an entity joins a consolidated group;
  • ensure that deferred tax liabilities are disregarded;
  • remove anomalies that arise when an entity holding securitised assets joins or leaves a consolidated group;
  • prevent unintended benefits from arising when a foreign resident ceases to hold membership interests in a joining entity in certain circumstances;
  • clarify the outcomes that arise when an entity holding financial arrangements leaves a consolidated group; and
  • clarify the treatment of intra‑group liabilities when an entity leaves a consolidated group.

These measures address concerns raised in the Board of Taxation’s post-implementation review of the consolidation rules.

The draft legislation and supporting materials are available on the Treasury website, and interested stakeholders are encouraged to provide their views.

Submissions are invited by 6 October 2017.