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  • PAYG instalments for consolidated groups

    A wholly owned group of Australian resident companies, trusts or partnerships can consolidate and be treated as a single entity for income tax purposes. The income, expenses and other income tax attributes (such as pay as you go (PAYG) instalments) of members are treated as belonging to the head company of the group.

    After the head company lodges its first consolidated tax return, we will advise them of their consolidated PAYG instalment rate and other PAYG instalment details for the group. The group becomes a 'mature' consolidated group, and the head company will then lodge activity statements and pay instalments for the consolidated group and its members as one entity.

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    Paying instalments

    If you're the head company of a mature consolidated group, you'll pay instalments quarterly or monthly. We will let you know if you are required to to pay monthly (you can't make this choice).

    You'll receive a separate activity statement for the PAYG instalments of the consolidated group. Payments are due within 21 days of the end of the month or quarter.

    You'll report and pay all your other activity statement obligations (such as GST, FBT instalments and PAYG withholding) on a different activity statement and continue to lodge and pay these in your usual cycle.

    If you pay quarterly, your payment due date will be based on your balancing date for the income year. For example, if your financial year ends on 30 June, payments are due within 21 days of the end of the September, December, March and June quarters. If a subsidiary member has a different quarterly cycle to you, it may need to adjust its systems so it can provide quarterly instalment income information to match your quarterly cycle.

    If you pay monthly, your instalments are due on the 21st day after the end of each month.

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    How much to pay

    In most cases you'll pay instalments using the instalment rate (option 2). Some head companies may be able to choose to pay using an instalment amount we calculate (option 1). If you're able to choose which option you use, we'll let you know on your first activity statement for the year.

    Instalment rate (option 2)

    If you use the instalment rate (option 2) to work out instalments for the group, you'll multiply the consolidated instalment rate (that we provide) by the consolidated group's instalment income for the period.

    If the group's circumstances change, you can vary the instalment rate – see Changing the amount to pay.

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    Working out the group's instalment income

    Your consolidated group's instalment income is the business and investment income of the group's members for the instalment period, excluding intra-group transactions.

    Intra-group transactions are ignored because they amount to accounting entries for income tax purposes between parts of the same company. As such, they are not income and not assessable to the head company.

    Your consolidated group's instalment income includes:

    • ordinary income assessable to you as the head company of the group
    • the assessable income for all members.

    The exception is when you have a member that is a life insurance company. In this case, your group's instalment income also includes any statutory income included in any group members complying superannuation taxable income.

    It is important that subsidiary members report their contribution to the group's instalment income to you as soon as possible after the end of the instalment period. This is so that the group's monthly or quarterly PAYG instalments are paid on time.

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    How we calculate the consolidated instalment rate

    We calculate your consolidated instalment rate using information from your most recently lodged tax return.

    If you've had tax losses transferred to you from other group members or former group members, we'll include in your taxable income the lesser of any tax loss that has been either carried forward or deducted in your most recent tax return.

    We may give you a new instalment rate after you lodge a tax return, or if there's a change in your group membership.

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    Taxation of financial arrangements

    If you apply the rules for taxation of financial arrangements (TOFA) you need to determine if you're required to pay monthly instalments.

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    Instalment amount (option 1)

    You can pay using the instalment amount (option 1) if your group either:

    • has business and/or investment income of $2 million or less
    • is a small business entity.

    The main advantages of this option are that:

    • subsidiary members don't need to provide quarterly income information to you as the head company
    • you don't need to work out how much to pay.

    We work out the amount you need to pay based on the group's previous tax situation.

    If you're eligible to pay using the instalment amount, this option will be available to select on your consolidated activity statement.

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    Changing the amount to pay

    If you think your consolidated instalment rate or amount will result in you paying too much (or too little) tax for the group for the year, you can vary it.

    When varying as a result of consolidation, use the special variation reason code 33 (consolidations) on the consolidated activity statement.

    When you vary it's important not to underestimate the rate, instalment income or the amount. We compare the group's instalments to their total tax payable on instalment income for the financial year. If the group's varied instalments are less than 85% of that total, you may be subject to general interest charge (GIC) on the difference, as well as penalties.

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    PAYG instalments for subsidiary members

    When a company joins a mature consolidated group as a subsidiary member, its PAYG instalment obligations end in the instalment period (month or quarter) in which the head company starts reporting and paying PAYG instalments for the group.

    When the member's balancing date is different to the head company's

    When a subsidiary member has a different reporting cycle to the head company, the subsidiary member will pay their last instalment for the period that includes the balancing date of the head company.

    For example, a subsidiary member is a July balancer and the head company is a June balancer. The head company started paying instalments for the consolidated group from 1 July. The subsidiary member will need to pay an instalment for the 1 May to 31 July quarter, and will then exit the PAYG instalments system.

    Using the instalment rate to calculate instalments

    If a subsidiary member uses the instalment rate (option 2), they will calculate their instalment income for the period ending on the date the head company starts paying instalments. In the example above this would be 1 July. The subsidiary member uses its own instalment rate to calculate the final payment amount.

    Any income the member earns after the head company starts reporting and paying PAYG instalments for the group is treated as belonging to the head company.

    Using the instalment amount to calculate instalments

    If the subsidiary member pays using the quarterly or annual instalment amount (option 1), their instalment amount for the whole period should be paid. However, if they think this will result in them paying too much (or too little) tax for the group for the year, they can vary it.

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      Last modified: 26 Jul 2019QC 27195