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13 Mar 09 NTLG Consolidation Subcommittee update

Following the preliminary report on the agenda for the recent meeting of the NTLG Consolidation Subcommittee held on 26 February 2009 (see 2009 TAXVINE No 7 (27 February 2009)), Matt Hayes FTIA (KPMG) has reported some further points of interest from proceedings on the day including:

  • practitioners and the ATO are concerned about a number of unresolved issues involving the MEC regime and discussed strategies for addressing these issues, including reforming the MEC Subgroup of the Consolidation Subcommittee. Concerns raised included problems associated with J1 CGT events, the operation of Division 711 and 719-F, working through the loss rules using a top company, what happens to various tax attributes in the absence of any replacement head company, transferring up subsidiary members to become eligible tier one companies, and the impact of Division 855 on pooling cost base rules;
  • after discussing a number of issues relating the treatment of deferred tax assets and deferred tax liabilities (eg, scope of application of s 705-70(1A), what happens where there is no deferred tax liability at joining time but one is created as part of the joining process), it was recognised that further discussion and interaction between the ATO and industry was warranted to determine whether there needed to be a number legislative fixes or not in this area; and
  • updates were provided on developments involving tax sharing agreements, intra-group assets, single entity rule, entry history rule and exit history rule, sub-division 705-C for non consolidated groups, trust joining and leaving a tax consolidation group during an income year, straddle contracts, foreign hybrids, earn outs, and convertible notes.

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