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19 Apr 12 Consolidated groups – proposed amendments

On 18 April 2012 the Assistant Treasurer released for public consultation an exposure draft of proposed amendments that will implement changes to the income tax law affecting consolidated groups. The amendments were announced by the then Assistant Treasurer on 25 November 2011. They relate to the operation of the consolidation tax cost setting rules and the operation of the taxation of financial arrangements (TOFA) rules for consolidated groups.

The proposed consolidation amendments (in Schedule 1 to the exposure draft legislation) modify the consolidation tax cost setting and rights to future income rules to make the tax outcomes for consolidated groups more consistent with the tax outcomes that arise when assets are acquired outside the consolidation regime.

The proposed amendments to the taxation of financial arrangements (TOFA) consolidation interaction and TOFA transitional balancing adjustment provisions (in Schedule 2 to the exposure draft legislation) are designed to ensure that the tax treatment of financial arrangements that are part of the assets and liabilities in a consolidation/joining event is consistent with the TOFA tax timing rules.

Interested parties are invited to comment on the consultation papers. The closing date for submissions is Wednesday, 2 May 2012.

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