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The ATO advises that the Government has amended the operation of the rules governing the interaction between the tax consolidation regime and the taxation of financial arrangement (TOFA) rules.

The changes alter the application of the consolidation and TOFA rules for tax consolidated groups, including:

  • the tax treatment of financial arrangements upon joining
  • the application of the TOFA transitional balancing adjustment provisions in respect of financial arrangements that were acquired from a joining entity.

The changes, contained in Schedule 2 of Tax Laws Amendment (2012 Measures No 2) Act 2012, received Royal Assent on 29 June 2012. They apply retrospectively from 26 March 2009, the commencement date of the TOFA rules.

A company may be affected by the amendments if it is a head company of a tax consolidated group to whom the TOFA rules apply, and one or both of the following are satisfied:

  • it had an entity join the tax consolidated group before the TOFA rules started to apply to it and made a transitional election to apply the TOFA rules to its existing financial arrangements
  • it had an entity join the tax consolidated group after the TOFA rules started to apply to it.

The ATO has now published instructions as to what taxpayers who are affected by the amendments must now do.


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