Tax Consolidation: an update on emerging issues

Published on 22 Feb 2005 | Took place at Le Meridien at Rialto, Melbourne, VIC

Although Australia's internationally path-breaking tax consolidation legislation commenced on 1 July 2002, tax consolidation is currently a moveable feast. It has taken until December 2004 to introduce the final instalment of the law. The Assistant Treasurer's media release of 20 December 2004 announced an extension of time until 31 December 2005 for some of the 'irrevocable' elections by consolidated groups to be revoked.

This will cause many groups that have already lodged a consolidated return to revisit past decisions in the light of more recent developments. For example, just how robust are the tax losses for which a group has created an available fraction using 'irrevocable' value donations?

Problems are starting to emerge when consolidated groups sell a subsidiary member. How robust are the exit calculations for the member? It may have an unsuspected deferred tax liability, causing double tax, or assets for which there is no tax cost!

Tax practitioners are having difficulty coping with the torrent of materials issuing from the ATO, which released numerous rulings and determinations in late 2004, and has only just formed working parties with the profession to consider losses, exit from a consolidated group and foreign-owned MEC (multiple entry consolidated) groups.

The purpose of this seminar was to provide an update on the impact of the recent legislative changes to Consolidation and the impact of Consolidation tax rulings and determinations.