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15/11/2010 Consolidation regime changes

Since its inception in 2002, the consolidation regime has allowed wholly-owned corporate groups to operate as a single entity for income tax purposes.

The 2010-11 Annual Budget, has resulted in Government initiatives that aim to improve how collections of the income tax from consolidated and multiple entry consolidated groups (MEC) are completed. Changes include;

–          from 11 May 2010, the government can recover unpaid (PAYG) liabilities

–          from 11 May 2010, the ‘liability for payment of tax’ rules apply to MEC groups

–          from the 2004-05 income year, an entity that pays its contribution amount under a tax sharing agreement can leave a consolidated group of MEC group clear from any further liability

–          from 1 July 2002, where there is a change in the provisional head company of a MEC group during an income year, any PAYG instalments paid by the former provisional head company on behalf of the group are attributed to the group.

The above changes were announced in the hope of resolving several long-standing operational issues and providing greater certainty and less compliance costs to businesses seeking to consolidate for tax purposes.