The Minister for Revenue and Assistant Treasurer, Peter Dutton MP, today announced a change to the consolidation regime to allow ongoing consolidated groups and multiple entry consolidated groups (MEC groups) to restructure with minimal tax consequences.
Under the consolidation regime, when a group restructures, for example by way of a de-merger, it can result in a consolidated group converting to a MEC group, or a MEC group converting to a consolidated group.
“Apart from certain integrity measures, a group conversion will, in essence, be a seamless transition for the ongoing group,” Mr Dutton said.
Consequently, when a change in the type of consolidated group occurs:
- the tax cost setting rules will not apply to the assets of the ongoing group members (and therefore certain capital gains and losses will not arise);
- tax losses of the ongoing group will not be tested and the capital losses that are apportioned over five years will not become immediately available;
- the ongoing group's history will be transferred to the new group; and
- certain notifications currently required to be given to the Commissioner of Taxation will be removed.
In addition, when a MEC group changes to a consolidated group, the existing integrity provisions will continue to apply.
The new rule will apply to conversions that occur on or after today.
“These changes will significantly reduce compliance costs for businesses that restructure”, Mr Dutton said.
“They further demonstrate the Government’s preparedness to listen and respond to the views of the business community through open and constructive engagement.”
The business community will continue to be consulted on the development of legislation to implement these changes.