Australia's tax consolidation regime was today significantly enhanced by the passage of laws that resolve several long-standing operational issues and provide greater certainty and less compliance costs to businesses seeking to consolidate for tax purposes.
"These amendments resolve issues that have arisen with the practical operation of the consolidation regime since its introduction in 2002," the Assistant Treasurer said.
"They significantly boost certainty and cut back unnecessary compliance costs."
"The consolidation amendments make key changes to clarify the operation of the tax cost setting rules that apply when an entity joins or leaves a consolidated group."
"They also ensure the tax cost-setting amount allocated to an asset can be used for subsequent tax purposes."
Other modifications to the tax cost-setting rules ensure that non‑membership equity interests issued by an entity that joins or leaves a consolidated group are properly taken into account.
"Several of the measures enacted today will reduce compliance costs for consolidated groups," said the Assistant Treasurer.
"In particular, the amendments to ensure that minimal tax consequences arise when a consolidated group converts to a multiple entry consolidated group, or vice versa, will significantly reduce compliance costs for groups that restructure."
The amendments also modify the mechanism for making various choices in relation to the formation of, or changes to, a consolidated group. This will overcome administrative difficulties that have arisen with the current mechanism for making these choices.
Further, the amendments improve the interaction with the capital gains tax rules by removing difficulties that arise when a capital gains tax event straddles the time that an entity joins or leaves a consolidated group and by improving the treatment of pre‑capital gains tax membership interests that are held in a joining entity.
"I would particularly like to thank the members of business and professional groups who made their views known during the extensive consultation process", the Assistant Treasurer said.