Consolidation Submission.pdf (198 kb)
Greenwoods & Herbert Smith Freehills has provided a submission on the proposed tax consolidation amendments contained in Treasury Laws Amendment (2017 Measures No. 9) Bill 2017 as released in Exposure Draft form on 11 September 2017. This proposed bill implements various amendments to the tax consolidation rules as announced by the Government in 2013, 2014 and 2016. The amendments include:
- subject to some specific carve outs, the removal of ‘future deductible liabilities’ from an entity’s entry tax cost setting amount when it joins a tax consolidated group or a multiple entry consolidated group (Tax Group);
- the removal of deferred tax liabilities from both an entity’s entry tax cost setting amount when it joins a tax consolidated group and an entity’s exit tax cost setting amount when it leaves a Tax Group (subject to a proposed transitional rule);
- amendments to address anomalous outcomes that can arise from the accounting treatment of securitisation arrangements;
- a specific integrity measure that switches off the tax cost setting rules where an entity joins a Tax Group after being transferred from a non-resident ‘associate’ where a capital gain or loss on the transfer for the associate was disregarded and there was no change in the economic ownership of the joining entity for the prior 12 months;
- a technical correction required in relation to the setting of the tax cost of former intra-group Division 230 TOFA assets and liabilities when an entity leaves a Tax Group; and
- amendments to address concerns where value has been shifted between members of a Tax Group and one of the members later leaves the Tax Group.
These proposed amendments have various dates of application.
Our submission raises a number of concerns with the proposed bill and explanatory memorandum including:
- the timing impact of the future deductible liabilities measure where the ‘benefit’ of the future deduction will not be realised for a long period of time but the consequences of excluding the liability from the entity’s entry tax cost setting amount will be realised in a short period of time;
- the inclusion of a transitional rule which, in our view inappropriately restricts the application of the proposal to remove deferred tax liabilities from an entity’s exit tax cost setting amount; and
- various clarification and drafting points.
Aldrin De Zilva
Director, Head of Projects & Infrastructure