The Australian Government will modify the consolidation loss rules to allow entities that would have an available fraction of nil, due to rounding, to instead be able to round to the nearest significant digit, the Minister for Revenue and Assistant Treasurer, Mal Brough, announced today.
'This change will overcome concerns raised by industry that, where a joining entity with a relatively small market value joins a much larger consolidated group, the current rounding rule can cause the joining entity's available fraction to be nil. An available fraction of nil effectively cancels the losses of that joining entity,' Mr Brough said.
The available fraction is used to regulate the rate that a consolidated group can use of losses of joining entity. The available fraction was designed to be a proxy for the rate an entity would utilise its losses outside of consolidation. This change is therefore maintaining the intent of the original policy.
Legislation giving effect to these modifications will be introduced as soon as practicable and will have effect from 1 July 2002, the commencement of the consolidations regime.