In forming a consolidated group during the transitional period (the first two years of consolidation, 2002-03 and 2003-04), the head company had the option of retaining existing tax costs for the assets of joining subsidiaries (sticking) or setting new tax costs by applying the cost setting process (spreading). Setting new tax costs is mandatory for groups forming after the transitional period.
The head company makes the choice to stick or spread in the context of lodging the first consolidated income tax return. An amendment enacted in March 2004 enables the head company to change its decision to stick or spread in relation to a particular subsidiary provided it amends its tax return by 31 December 2004 and gets the agreement of any entity (whether or not it remains a subsidiary member) owning an asset the tax cost of which is affected by the choice. The Minister for Revenue and Assistant Treasurer has announced that groups will now have until 31 December 2005 to revoke an election to retain existing tax costs for the assets of a joining subsidiary or to make an election to retain existing tax costs (if it previously chosen to set new tax costs). Further details are provided on the Assistant Treasurer's website press release No.023 of 20 December 2004.