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Only the head company of a consolidated group or multiple entry consolidated (MEC) group is entitled to a foreign income tax offset for foreign income tax paid on income or gains that are included in its assessable income under the single entity rule. Where a subsidiary member pays foreign income tax on income or gains included in the head company's assessable income, the head company is treated as having paid the tax.
The head company's foreign income tax offset is determined in the same way as for taxpayers outside the consolidation regime.
Special transitional rules allow a joining entity to transfer unused pre-commencement excess foreign income tax to the head company at joining time. The pre-commencement excess foreign income tax transferred from the joining entity is pooled with any other pre-commencement excess foreign income tax of the head company and subsidiary members. The head company can use pre-commencement excess foreign tax transferred from a joining entity in an income year starting at or after the joining time, subject to the general transitional rules.
If an entity leaves a consolidated or MEC group, it will not have access to any pre-commencement excess foreign income tax that it transferred to the head company when it joined the group.
Last modified: 23 Jul 2009QC 22894
More detailed information on the operation of the foreign income tax offset rules for consolidated groups or MEC groups, including the special transitional rules for pre-commencement excess foreign income tax, is contained in the Consolidation reference manual.
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