An entity's PAYG instalment obligation generally ceases from the date of joining a new group which is already 'mature'. A 'mature' consolidated group is one in which the head company pays PAYG instalments for the entire group.
However, if the joining time is before the end of the entity's quarter - or year, for annual payers - the joining entity must pay an instalment for that quarter or year.
If the entity uses the quarterly instalment rate × instalment income method, it calculates instalment income from the beginning of its quarter up to the joining time.
If the entity pays a quarterly or annual instalment amount worked out by us, the whole amount remains payable but can be varied. The entity may be liable to pay general interest charge if its varied instalment amount is based on an estimate that is less than 85% of the actual tax payable on its business and investment income.
If an entity leaves a mature group and immediately joins another 'mature' consolidated group, it does not have a direct obligation to pay PAYG instalments. The new head company reports the entity's instalment income from the date of joining.
If a leaving entity joins another group during that group's formation period, either immediately or after receiving an instalment rate, the entity pays its own PAYG instalments until the start of the quarter in which the head company of the new group is given a consolidated instalment rate. The formation period is the time before the head company of the group has begun paying consolidated group PAYG instalments.
For annual payers, the whole instalment amount remains payable but can be varied.
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Varying the instalment amount could have consequences for the head company of the new group. Both the head company and subsidiary member should carefully consider the basis on which any variation is made. If any member varies an instalment, the instalments of all members will be considered on a group basis to determine if the head company is liable for a general interest charge (GIC). The head company may be liable for GIC if the varied instalment amount or rate is less than 85% of the amount or rate that would have covered the group's actual tax liability for that year.
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Leaving a group during the 'formation period'
When an entity leaves a consolidated group during the formation period, the entity's existing PAYG instalment obligations and activity statements continue without interruption.
The formation period is the time before the head company has begun paying consolidated group PAYG instalments.
Deregistered companies
Under section 9 of the Corporations Act 2001 a company is defined as a company registered under that Act. When a company is deregistered by the Australian Securities & Investments Commission (ASIC), it ceases to exist as a Corporations Act company and therefore no longer meets the definition of an entity as detailed in the tax law. Accordingly, when a subsidiary member of a consolidated group is deregistered, it can no longer form part of a consolidated group and the head company is required to notify us that the subsidiary member has left the group on the date it was deregistered. Where an entity leaves a consolidated group because it has been deregistered, we withdraw it from the PAYG instalment system.
Where an entity no longer forms part of a consolidated group it is normally required to separately lodge income tax returns, activity statements and pay its income tax and activity statement obligations. As a deregistered company is not an entity under the tax law, this requirement generally applies only in the following circumstances:
- when the date of deregistration occurs after the date of exit from the consolidated group
- when a deregistered company joins and leaves the consolidated group in the same income year.
In either case, the liquidator has an obligation to ensure that all relevant activity statements and income tax returns are lodged and that any amount owing to us is paid before the company is deregistered.
If a subsidiary member needs to check if they have any lodgment or payment obligations they should contact us by:
Requests to leave the PAYG instalment system should be made in writing, quoting the reference 'B6110', to
Last Modified: Wednesday, 16 January 2013