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  • PAYG instalments for entities joining or leaving a consolidated group

    A consolidated group is treated as a single entity for income tax purposes. After the head company receives its first consolidated instalment rate, the consolidated group becomes 'mature', and it uses this rate to meet pay as you go (PAYG) instalment obligations for all subsidiary members of its consolidated group.

    When a subsidiary member joins a mature consolidated group, it stops paying PAYG instalments. When it leaves, it starts paying its own PAYG instalments.

    On this page:

    When a subsidiary member joins a group

    The head company must notify us within 28 days of a subsidiary member joining a group. If they don't there may be penalties and processing delays.

    When an entity joins a mature group as a subsidiary member, where the head company already pays PAYG instalments for the entire group, the entity's PAYG instalment obligations will end on the date it joins the group.

    However, if this date is before the end of their instalment period (month, quarter or year), the subsidiary member must pay an instalment to cover the period up until they joined the group.

    If the subsidiary member calculates their instalments using the:

    • instalment rate – they need to calculate and report their instalment income for their instalment period up until the date they joined the group. They pay their instalments based on this income.
    • instalment amount – they need to pay the instalment amount for the whole period. If this will result in paying too much (or too little) tax for the year, they can vary it.

    If an entity joins a consolidated group immediately after leaving another consolidated group, where the head company pays the instalments for the new group, the head company of the new group will:

    • report the joining member's instalment income
    • pay the joining member's instalments from the date the entity joined the group.

    Joining a group during their formation period

    A group is in its formation period when the head company:

    • hasn't lodged a consolidated tax return
    • hasn't received a consolidated instalment rate
    • isn't reporting and paying PAYG instalments for the group.

    If an entity joins a group during this period, it must continue paying its own PAYG instalments until the head company of the new group is given a consolidated instalment rate.

    When a subsidiary member leaves a group

    A subsidiary member begins paying its own PAYG instalments from the day after it leaves a mature group. This will occur even if the entity didn’t have a PAYG instalment obligation before joining the consolidated group.

    The head company must notify us within 28 days of a subsidiary member leaving a group. If they don't there may be penalties and processing delays.

    We'll let the subsidiary member know their instalment rate and how often to pay, and:

    • They must use the instalment rate (option 2) to calculate their PAYG instalments. We give them the instalment rate of their former head company.
    • They must use the same payment cycle (for example, quarterly or monthly) as their former head company, even if they were an annual payer before they joined the group.
    • Their first instalment is based on their instalment income from the date they left the group to the end of the instalment period.

    If the subsidiary member immediately joins another mature consolidated group, where the head company of this group pays instalments for the group, this head company will report the joining member's instalment income from the date of joining.

    When to pay

    When an entity lodges their first tax return since leaving a mature consolidated group, we will let them know about their payment options. The leaving member's activity statements will show their PAYG instalments and other obligations (such as GST) and when their payment is due.

    If they left a mature consolidated group that was paying monthly instalments, and they want to stop paying monthly, they will need to contact us before the start of the next income year.

    See also:

    How much to pay

    When instalments are due, we'll send the leaving member an activity statement. They'll need to calculate their instalments using the instalment rate (option 2) of the head company. They can vary this rate if needed.

    It's important to remember not to underestimate the PAYG instalment rate or instalment income. We will compare the leaving entity's instalments to the total tax payable on their instalment income for the financial year. If their varied instalments are less than 85% of that total, they may be subject to general interest charge (GIC) on the difference, as well as penalties.

    Working out instalment income

    After an entity leaves a mature consolidated group, any income it receives from transactions with the group's members is included in its instalment income. See instalment income for a list of what needs to be included.

    Next steps:

    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.

    Deregistered company

    When a subsidiary member of a consolidated group is deregistered by the Australian Securities and Investments Commission (ASIC):

    • it ceases to exists as an entity (section 9 of the Corporations Act 2001)
    • it can no longer form part of a consolidated group
    • the head company is required to tell us that the subsidiary member has left the group, effective on the date it was deregistered.

    We will then remove the subsidiary member from the PAYG instalments system.

    Before the company is deregistered, the liquidator has an obligation to ensure all relevant activity statements and tax returns are lodged and any amount owing to us is paid.

    The deregistered company will still be required to lodge and pay activity statements and tax returns if:

    • the date of deregistration occurs after the date of exit from the consolidated group
    • they join and leave the consolidated group in the same income year.

    Check your obligations

    If you are a subsidiary member and you need to check your lodgment or payment obligations, you can talk to your registered agent or contact us.

      Last modified: 25 Jul 2019QC 19588