Consolidation

We focus on consolidation issues from inappropriate CGT reporting, cost-setting rules, membership and loss utilisation.

On this page

• What consolidation does
• CGT consequences
• Cost-setting rules
• Membership
• Losses

What consolidation does

Consolidation allows wholly-owned corporate groups to operate as a single entity for income tax purposes.

CGT consequences

We focus on the reporting of capital gains or losses related to consolidation.

Situations that attract our attention include:

• corporate groups that restructure and have one or more consolidated groups within a private group
• where multiple entities join or leave the consolidated group
• incorrectly reporting capital gains or losses arising from the allocable cost amount (ACA) and allocation process on joining or leaving the consolidated group – for example, a head company has not reported a capital gain when a negative ACA occurred from an entity leaving the group.

Cost-setting rules

We focus on the:

• allocable cost amount (ACA) calculation
• allocation on joining or leaving a consolidated group.

Situations that attract our attention include:

• restructuring that may affect the ACA calculation, before joining, forming or leaving a consolidated group
• on joining a group    
  • miscalculating or overstating the ACA, for example, relating to the costs of membership interests or the accounting liabilities of the joining entity
  • inappropriately including or excluding assets before allocating the ACA to assets
  • incorrectly allocating the ACA to assets which results in increased revenue deductions or cost bases of CGT assets – examples include using inappropriate market values or incorrectly making relevant adjustments  
• on leaving a group    
  • incorrectly calculating the ACA, for example by excluding or understating liabilities
  • incorrectly allocating the ACA to the membership interests and treatment of pre-CGT shares (if any).  

Membership

We focus on the formation of a consolidated group and the eligibility of members.

Situations that attract our attention include:

• the incorrect formation of a consolidated group
• incorrectly including or excluding an entity as a member of a consolidated group
• late notifications of entries or exits from a consolidated group.

Losses

We focus on whether losses have been correctly transferred, the available fraction has been correctly calculated and losses correctly used.

Situations that attract our attention include:

• incorrectly including or excluding an entity as a member of a consolidated group, where it may cause unintended tax benefits
• incorrectly transferring or using losses
• high available fractions that, if incorrect, would allow a consolidated group to use transferred losses at an inappropriate rate
• failing to adjust the available fraction as required.