If you are the head company of a consolidated or MEC group and a subsidiary member joins or leaves your consolidated or MEC group, the entry history rule or exit history rule will assist you to calculate your liability for income tax or loss, which could be impacted by a clawback adjustment.
For example, the entry history rule requires that after an entity becomes a subsidiary member of a consolidated or MEC group, everything that happened in relation to it before it became a subsidiary member is taken to have happened in relation to you (the head company) for the purposes of calculating your liability for income tax or loss.
If a company received a government recoupment in the income year before joining your consolidated or MEC group, you are taken to have received that recoupment after the subsidiary member joined the consolidated or MEC group due to the entry history rule. You will then take this recoupment into account when determining if you need to make a clawback adjustment, its timing and amount, which will impact your tax outcomes.
See:
- Section 701-5 of the ITAA 1997 for the entry history rule
- Section 701-40 of the ITAA 1997 for the exit history rule.