Certain Aspects of the Consolidation Regime – Post-Implementation Review
On 14 May 2013, the Assistant Treasurer and Minister Assisting for Deregulation, the Hon David Bradbury MP, announced the release of the following Board of Taxation consolidation reports:
- Post-Implementation Review into Certain Aspects of the Consolidation Regime;
- Post-Implementation Review of Certain Aspects of the Consolidation Tax Cost Setting Process.
On 3 June 2009, the then Assistant Treasurer announced that the Board would undertake a post-implementation review of certain aspects of the consolidation regime. The aspects of the consolidation regime that were subject to review were:
- the operation of the single entity rule;
- the operation of the entry history rule in acquisition cases;
- the interaction between the consolidation provisions and other parts of the income tax law; and
- the effectiveness of the consolidation regime for small business groups.
The consolidation regime allows a wholly-owned corporate group to be treated as a single entity for income tax purposes. The objective of the consolidation regime was to promote business efficiency, improve the integrity of the Australian tax system and reduce ongoing income tax compliance costs for wholly-owned company groups that choose to consolidate. The consolidation regime was enacted in four major stages during 2002 and 2003. A number of refinements have been made to the regime since then and it was timely to take stock of whether, having regard to its objectives, key elements of the consolidation regime are operating as intended. The Board’s intention in undertaking this post-implementation review was not to reopen debates about the merits of the policy intent of the regime. The intention instead was to gauge how effective the legislation has been in delivering the policy intent. The Board appointed a working group of its members comprising Mr Keith James (Chairman of the Working Group and Deputy Chairman of the Board), Mrs Teresa Dyson (Chair of the Board), Mr Chris Jordan AO (Chairman of the Board until 31 December 2012) and Mr Curt Rendall to oversee this review. On 25 November 2011, the Government requested that the Board also investigate the treatment of liabilities under the consolidation regime and whether the consolidation tax cost setting amount for assets should be capped, and asked that the Board include advice on these issues when it reported back on its consolidation post-implementation review.
Post-Implementation Review into Certain Aspects of the Consolidation Regime
The Board completed its post-implementation review of certain aspects of the consolidation regime and provided its report to the Assistant Treasurer in June 2012. The Board’s report and transmittal letter are available for download. Further information on this review can be found on the post implementation review into certain aspects of the consolidation regime page.
Post-Implementation Review of Certain Aspects of the Consolidation Tax Cost Setting Process
Given the time available and the substantial overlap between the treatment of liabilities and certain other issues being considered, the Board decided to defer its advice on the following consolidation issues for inclusion into a separate report to the Government:
- the treatment of liabilities;
- investigating whether the tax cost of assets of entities joining a consolidated group should be capped;
- issues arising in the operation of CGT Event J1; and
- issues arising in the interaction between the CGT roll-over rules and the consolidation provisions.
The Board completed its post-implementation review of certain aspects of the consolidation tax cost setting process and provided its report to the Assistant Treasurer in April 2013. The Board’s report and transmittal letter are available for download.
Reference documents relating to this post-implementation review are as listed below:
- New Business Tax System (Consolidation) Bill 2002 Explanatory Material [PDF 643KB]
- House of Representatives Second Reading Speech
- An extract from the Explanatory Memorandum [PDF 134KB]
- Div 700-701 of the Income Tax Assessment Act 1997 [PDF 123KB]
Separate Review into the Consolidation Rights to Future Income and Residual Tax Cost Setting Rules
On 30 March 2011, the Assistant Treasurer released an announcement requesting the Board of Taxation to undertake a review of the consolidation rights to future income and residual tax cost setting rules and to provide a final report to the Government by 31 May 2011. The terms of reference for this review were released together with the announcement. The Board completed its report and provided it to the Assistant Treasurer on 31 May 2011. In preparing its report the Board took into account the various submissions to the review and discussions with stakeholders and its expert panel. Further information on this review can be found on the consolidation rights to future income and residual tax cost setting rules page. Further information on these reviews can be obtained from Terresa Yiu (02 6263 4453) at the Board of Taxation Secretariat.