• Consolidation: overview




    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    This document provides an introduction to the operation of the consolidation regime, and shows how eligible taxpayers will be affected.

    Taxing wholly-owned corporate groups as single entities

    Does your business structure consist of a company that owns 100% of another company, trust or partnership?

    Yes: you may be able to consolidate and should read this overview

    No: you can't consolidate and this overview is not relevant to your business

    The Australian Government has introduced consolidated income taxation of corporate groups to reduce compliance costs for business and improve the integrity of the tax system.

    Where a wholly-owned group does not choose to consolidate, the income tax system treats each company in the group as a separate entity. Taxing member entities separately means that each member must separately account for all intra-group transactions and debt and equity interests.

    For business, this imposes extra compliance costs and may stand in the way of the most efficient business structure. From the community's perspective, the previous grouping provisions for wholly-owned groups provided opportunities for tax avoidance through artificial arrangements.

    Key points

    • Wholly-owned corporate groups may have the option of consolidating for income tax from 1 July 2002.
    • Consolidation is optional but irrevocable.
    • The consolidated group operates as a single entity for income tax purposes, lodging a single income tax return and then paying a single set of pay as you go (PAYG) instalments.
    • One in, all in - if a group consolidates, all of the head company's eligible wholly-owned subsidiaries are members.
    • The grouping provisions for wholly-owned groups ended on 30 June 2003 for most taxpayers. Corporate groups must consolidate if they want any form of single entity treatment for income tax purposes.
    • Most small businesses involve single entities and are not affected by the consolidation regime. Consolidation is not relevant to the business activities of individuals (such as sole traders).
    • The Australian Government has introduced consolidation to reduce compliance costs for business, remove impediments to the most efficient business structures and improve the integrity of the tax system.
      Last modified: 08 Jul 2014QC 17531