The head company must:
- be an Australian resident (but not a prescribed dual resident) company
- not be a subsidiary member of a consolidated group or a group that is eligible to consolidate
- have at least some of its taxable income (if any) taxed at the general company tax rate.
A corporate unit trust or public trading trust that elects to be taxed like a company may be a head company.
A subsidiary member must:
- be a company, trust or partnership
- be wholly owned (either directly or indirectly) by the head company (disregarding finance shares that are a debt interest and up to 1% of ordinary shares that meet certain employee share scheme requirements)
- be an Australian resident (but not a prescribed dual resident)
- have at least some of its taxable income (if any) taxed at the general company tax rate (if a company).
Certain types of companies cannot be a head company or subsidiary member and certain types of trusts cannot be a subsidiary member. For example, superannuation funds generally cannot be a head company or subsidiary member.
A foreign-owned group of Australian resident subsidiaries that does not have a single resident head company may instead choose to consolidate by forming a multiple entry consolidated (MEC) group.
Figure 1 - As wholly-owned subsidiaries of the head company, companies A and B are subsidiary members of a consolidatable group. Company C is not a member as it is not wholly owned (directly or indirectly) by the head company.
There are certain qualities that must exist in a business structure for it to be eligible for consolidation.