As part of the 2013-14, 2014-15 and 2016-17 Budgets, the Government announced changes to the tax consolidation rules to ensure the integrity of the system.
The Bill contains six measures designed to remove anomalous tax outcomes that arise under the tax cost setting rules when an entity leaves or joins a tax consolidated group. These changes remove these unintended outcomes.
Specifically, the Bill improves the operation of the tax cost setting rules by:
- preventing a double benefit from arising in relation to deductible liabilities when an entity joins a consolidated group;
- ensuring that deferred tax liabilities are disregarded;
- removing anomalies that arise when an entity holding securitised assets joins or leaves a consolidated group;
- preventing unintended benefits from arising when a foreign resident ceases to hold membership interests in a joining entity in certain circumstances;
- clarifying the outcomes that arise when an entity holding financial arrangements leaves a consolidated group; and
- clarifying the treatment of intra-group liabilities when an entity leaves a consolidated group.
These measures address concerns raised in the Board of Taxation's post-implementation review of the consolidation rules.