Consolidation: income tax returns and consolidation

Key points

This information should be read in conjunction with the Company tax return instructions and other products that provide detailed information on calculating assessable income and completing income tax returns.

A number of large and consolidated entities have been incorrectly completing label T, the total amount of pay as you go (PAYG) instalments, on the company income tax return form. For more information read our tip 'Calculation statement - PAYG instalments'.

• The head company of a consolidated group lodges a single income tax return on behalf of the group as a whole.
• If an entity is a subsidiary member of a consolidated group for the entire income year it does not lodge an income tax return, but if it is a subsidiary member for only part of an income year it must lodge an income tax return covering the period(s) in which it was not part of a group.
• Taxpayers who have made a genuine attempt to meet their obligations won't be penalised if a consolidated return later needs to be amended because of new law, or new ATO rulings or determinations.
• Take care when nominating a date of consolidation.
• The requirements for lodging a franking account return (FAR) by a subsidiary member depend on whether the entity is a member of a consolidated group for the entire income year and the ATO has been notified of the group's formation by the time the FAR is due.
• Tips for completing the company ITR and schedules.

Lodgment obligations

Head companies

The head company of a consolidated group lodges a single income tax return on behalf of the group as a whole.

Where a group consolidates part way through an income year, the head company lodges a single return covering both its own activities up to the date of consolidation and the group's activities from the date of consolidation.

Other things to note:

• Indicate head company status at label Z1 - Consolidated head company (item 3 in Company tax return). This applies even if the company ceases to be a head company during the year of income. Note that the head company must separately notify us of its decision to consolidate by the time it lodges the group's first consolidated tax return.
• Complete one set of schedules. The amounts on each Schedule are made up of two components - one covering the head company's own activities up to the date of consolidation and the other covering the group's activities from the date of consolidation.

Subsidiary members

An entity that is a subsidiary member of a consolidated group for the entire income year is not required to lodge an income tax return.

But an entity that is a subsidiary member of a consolidated group for only part of an income year must lodge an income tax return accounting for the period (or periods) in which it was not part of a group. In these circumstances, the entity lodges a single return for the entire income year at the normal lodgment time, but includes only income and deductions attributable to the non-membership period (or periods).

Other things to note in completing a return for one or more non-membership periods:

• Indicate part-year membership of a consolidated group at label Z2 - Consolidated subsidiary member (item 3 in Company tax return), even if the entity is no longer a member of a consolidated group at 30 June.
• Do not indicate this is part-year return at the top of page 1 of the return form. (Even though the return includes income and deductions attributable to the non-membership periods, the return is for the entire income year and is lodged at the usual time.)
• Do not indicate this is a final return in the Final tax return field on page 1 of the Company tax return, as this will prevent setting of a PAYG instalment rate for the subsidiary, pending the head company being issued with a group instalment rate. (Until the head company is issued with a group PAYG instalment rate subsidiary members must continue to pay instalments at the prescribed rate.)
• Subsidiaries lodging a return for the transitional income years 2002-03 and 2003-04 do not need to complete schedules for capital allowances, CGT, losses, thin capitalisation, Schedule 25A or R&D - but must keep adequate records to substantiate any claims in the return.
• However, subsidiaries lodging a return do need to complete schedules for dividends and interest, PAYG and personal services income, if they are applicable (see accompanying schedules).

Lodgment timelines

For lodgment and payment dates, refer to 'lodgment program' on the Lodgment essentials page.