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Government announces major tax changes to consolidation rules

Deloitte Federal Budget media release


Wednesday 15 May 2013: The Government yesterday announced support for several further technical changes to the tax consolidation regime which are aimed at improving the integrity of the consolidation regime and are largely based on the recommendations made by the Board of Taxation in its post-implementation reviews into the consolidation regime.

Some of the key Board of Taxation recommendations supported by the Government include:

  • The formal recognition of the business acquisition approach in the consolidation core rules, along with the entry history rule, in relation to the treatment of assets transferred to a consolidated group from a joining entity.  This is not intended, by itself, to result in any changes to the core rules, however is intended to provide greater clarity in respect of the policy principles underpinning the consolidation regime;
  • Provisions to ensure the treatment of certain deductible liabilities are not taken into account twice;
  • The adoption of an ‘ending/creation model’ to ensure that the tax costs of intra-group assets (apart from membership interests) acquired, or disposed of, by consolidated groups, whether directly or indirectly, are recognised.  Some exceptions to the ending/creation model may  also be considered;
  • Measures aimed at addressing a consolidated groups ability to access double deductions by shifting the value of assets between entities i.e. "value shifting between subsidiaries"; and
  • A number of recommendations to address issues concerning the interaction of the consolidation provisions with other provisions in the general income tax law, such as the provisions dealing with trusts.
  • The amendments implementing these Board of Taxation recommendations will apply to transactions that take place after that announcement.

Disappointingly, the Government has decided to consider further (rather than support) the recommendations made by the Board of Taxation to simplify the consolidation rules to assist small to medium sized business groups in overcoming the complexity and high compliance costs they face in entering the consolidation regime.

“These proposals add to the significant back-log of unenacted and/or unresolved tax consolidation measures,” said Aldrin De Zilva, a tax partner at Deloitte.  “Consolidated groups are feeling somewhat fatigued by the quantum of changes in respect of tax consolidation and are unlikely to be impressed with again having to spend considerable amounts of time, effort and expense to comply with the further proposed changes in the consolidation provisions.”

Deloitte’s Federal Budget 2013 website

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Aldrin De Zilva
Job Title:
Partner, Tax
Tel: +61 3 9671 7541
Vessa Playfair
Deloitte Australia
Job Title:
Head of Corporate Affairs
Tel: +61 2 9322 7576, Mobile: +61 419 267 676

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