Simplifying tax consolidation
The Government has simplified two previously announced tax consolidation integrity measures.
Measures were announced in the 2013-14 Budget to prevent non-residents from ‘churning’ assets between consolidated groups to generate double deductions. The Government has deferred the start date of one aspect of the measure, which requires grouping of associates when considering whether the integrity rules apply. These grouping rules now apply from the date of introduction of the enabling legislation.
The 2016-17 Budget announcements removed adjustments relating to deferred tax liabilities from the consolidation entry and exit tax cost‑setting rules. The measure contained complex transitional rules which required taxpayers to determine if any deferred tax liabilities were included in entry tax cost‑setting calculations — if so, the measure would not apply. Following consultation, those complex transitional rules were removed from the final legislation.
It’s promising to see the Government has taken on board feedback from BDO and the wider tax profession. With the tax consolidation rules growing in complexity, a simplification is a welcome breath of fresh air.
Yet again, however, we see significant delays between the announcement of new legislation and its introduction. This time lag needs to be addressed.