Proposed amendments to the tax consolidation regime and ATO administrative treatment

Exposure draft legislation - restoring integrity to the consolidation regime

On 28 April 2015 the Commonwealth Treasury released the Tax and Superannuation Laws Amendment (2015 Measures No 4) Bill 2015: Consolidation to implement recommendations made by the Board of Taxation.

The Treasury states that the Bill aims to restore the integrity of the consolidation regime through five measures that were announced in the 2013/2014 and 2014/2015 Federal Budgets:

  1. Remove a double benefit (or double detriment) arising in respect of certain liabilities held by a joining entity that is acquired by a consolidated group;
  2. Remove anomalies arising when an entity joins or leaves a consolidated group where the entity has securitised an asset;
  3. Prevent the tax costs of a joining entity’s assets being uplifted where no tax is payable by a foreign resident owner on the disposal of the joining entity in certain circumstances;
  4. Clarify the operation of the Taxation of Financial Arrangements (TOFA) provisions when certain intra group assets or liabilities emerge from a consolidated group when a subsidiary member exits the group; and
  5. Remove anomalies arising when an entity leaves a consolidated group holding an asset corresponding to a liability owed to it by the old group where the value of the asset taken into account for the tax cost setting purposes was not appropriate.

The closing date for submissions on the exposure draft legislation is Tuesday, 19 May 2015. Access the exposure draft legislation and explanatory material

ATO Administrative treatment

On 6 May 2015, the Australian Taxation Office (ATO) released the following details of its administrative treatment of the proposed changes.

  1. The ATO will accept tax returns as lodged during the period up until the proposed changes are enacted. Prior year assessments will not be reviewed until the outcome of the proposed amendments is known.
  2. After the new law is enacted, taxpayers need to review their positions, including, where relevant, back to the first income year to which TOFA applied (the 2010 income year on an elective basis, or the 2011 income year on a mandatory basis), and:
  • taxpayers whose claims accord with the new law when enacted do not need to do anything more;
  • taxpayers who applied the existing law and under-claimed according to the new law can seek amendments and, if a reduction in liability results, interest on overpayment will be paid;
  • taxpayers who applied the existing law and over-claimed according to the new law will need to seek amendments. No tax shortfall penalties will apply and any interest attributable to the shortfall will be remitted to nil up to the date of enactment of the law;
  • any interest accruing after the date of enactment will be remitted for taxpayers who actively seek to amend their assessments or revise activity statements within a reasonable time after the enactment of the law change.

Access the ATO administrative treatment.

Download a pdf version of this article: Proposed amendments to the tax consolidation regime and ATO administrative treatment

For further information please contact:

Renuka Somers
Special Counsel
Sladen Legal
M +61 407 478 592  |  T +61 3 9611 0110


Daniel Smedley
Principal | Accredited Specialist in Tax Law
Sladen Legal
M +61 411 319 327  |  T +61 3 9611 0105