When a group consolidates, the income, expenses and other income tax attributes (such as PAYG instalments) of members are treated as belonging to the head company of the group.
After the head company lodges its first consolidated tax return, we will advise it of its consolidated PAYG instalment rate. The group is then a 'mature' consolidated group. The head company will lodge activity statements and pay instalments for the consolidated group and its members as one entity.
The head company and subsidiary members will continue to report and pay all other activity statement obligations (such as GST, FBT instalments and PAYG withholding) on their own activity statements, according to their usual lodgment cycle.
As the head company of a mature consolidated group, you will pay instalments quarterly or monthly. We will let you know if you are required to pay monthly (you cannot make this choice yourself).
You will receive a separate activity statement for the PAYG instalments of the consolidated group.
Payments are due within 21 days of the end of the month or quarter.
If you pay quarterly, your payment due date will be based on your balancing date for the income year. For example, if your income year ends on 30 June, payments are due within 21 days of the end of the September, December, March and June quarters.
If a subsidiary member has a different quarterly cycle to you, it may need to adjust its systems so it can provide quarterly instalment income information to match your quarterly cycle.
Taxation of financial arrangements
If you apply the rules for taxation of financial arrangements (TOFA), you need to determine if you are required to pay monthly instalments.
Head companies are usually required to calculate instalments using the instalment rate (option 2).
Some head companies may be able to choose to pay using an instalment amount we calculate (option 1). If you have this choice, it will be shown on your first activity statement for the year.
Instalment rate (option 2)
To work out instalments for the group, the head company multiplies the consolidated instalment rate (that we provide) by the group's instalment income for the period.
Working out the group's instalment income
Your consolidated group's instalment income is the business and investment income of the group's members for the instalment period, excluding:
- intragroup transactions.
Intragroup transactions are ignored for income tax purposes because they amount to accounting entries between parts of the same company. As such, they are not income and not assessable to the head company.
Your consolidated group's instalment income includes:
- ordinary income assessable to you as the head company of the group
- the assessable income for all members.
There is an exception if a member is a life insurance company. In this case, your group's instalment income also includes any statutory income included in any group member's complying superannuation taxable income.
Subsidiary members should report their contribution to the group's instalment income to you as soon as possible after the end of the instalment period, so that the group's monthly or quarterly PAYG instalments are paid on time.
How we calculate the consolidated instalment rate
We calculate your consolidated instalment rate using information from your most recently lodged tax return.
If you have had tax losses transferred to you from other group members or former group members, we will include in your taxable income the lesser of any tax loss that has been either carried forward or deducted in your most recent tax return.
We may give you a new instalment rate after you lodge a tax return, or if there is a change in your group membership.
Instalment amount (option 1)
If you are eligible to pay using the instalment amount, this option will be available on your consolidated activity statement.
You can pay using the instalment amount (option 1) if your group either:
- has business and investment income of $2 million or less
- is a small business entity.
The main advantages of this option are that:
- subsidiary members do not need to provide quarterly income information to you as the head company
- you do not need to work out how much to pay.
We work out your instalment amount based on the group's previous tax situation.
If you think your consolidated instalment rate or amount will result in you paying more, or less, than your expected tax for the group for the year, you can vary it.
When varying as a result of consolidation, use the special variation reason code 33 (consolidations) on the consolidated activity statement.
When you vary it is important not to underestimate. We compare the group's instalments to its total tax payable on instalment income for the financial year. If the group's varied instalments are less than 85% of that total, you may be subject to general interest charge on the difference, as well as penalties.
The head company must notify us within 28 days of an entity joining the group. Failure to notify may result in penalties and processing delays.
Joining a mature group
When an entity joins a mature group as a subsidiary member, the entity's PAYG instalment obligations end on the date it joins the group.
However, if this date is before the end of the subsidiary member's instalment period, it must pay an instalment to cover the period up until it joined the group.
If the subsidiary member calculates its instalments using the:
- instalment rate – the member calculates and reports its instalment income for its instalment period up to the date it joined the group, and pays its instalment based on this income
- instalment amount – the member pays the instalment amount for the whole period. If this will result in paying too much (or too little) tax for the year, the member can vary it.
If an entity joins a mature consolidated group immediately after leaving another consolidated group, the head company of the new group will:
- report the joining member's instalment income
- pay the joining member's instalments from the date the entity joined the group.
Joining a group during formation
A group is in its formation period when the head company has not:
- lodged a consolidated tax return
- received a consolidated instalment rate
- reported and paid PAYG instalments for the group.
If an entity joins a group during this period, it must continue paying its own PAYG instalments until the head company of the new group is given a consolidated instalment rate.
When the member's balancing date is different to the head company's
When a joining member has a different reporting cycle to the head company, the joining member will pay their last instalment for the period that includes the balancing date of the head company.
Example: different balancing date for joining member
A subsidiary member is a July balancer. The head company is a June balancer, and starts paying instalments for the consolidated group from 1 July.
The subsidiary member will pay an instalment for the 1 May to 31 July quarter, and will then exit the PAYG instalments system.End of example
A subsidiary member begins paying its own PAYG instalments from the day after it leaves a mature group.
The head company must notify us within 28 days of a subsidiary member leaving a group. Failure to notify may result in penalties and processing delays.
Payment cycle and method
- let the former member know its instalment rate and how often to pay (these will be the same as for its former head company)
- include a PAYG instalments obligation in the former member's activity statements.
The former member must:
- use the instalment rate (option 2) to calculate its PAYG instalments
- the rate can be varied if needed
- calculate its first instalment based on its instalment income from the date it left the group to the end of the instalment period.
When the former member lodges its first tax return after leaving the group, we will update its payment cycle and options.
If the entity left a mature consolidated group that was paying monthly instalments, and it wants to stop paying monthly, it needs to contact us before the start of the next income year.
If the former member immediately joins another mature consolidated group, the new head company will report the joining member's instalment income from the date of joining.
Working out instalment income
After an entity leaves a mature consolidated group, any income it receives from transactions with the group's members is included in its instalment income.
Leaving a group during formation
If an entity leaves a consolidated group during the formation period, the entity's existing PAYG instalment obligations and activity statements continue without interruption.
If a subsidiary member of a consolidated group is deregistered by the Australian Securities & Investments Commission:
- it ceases to exist as an entity (section 9 of the Corporations Act 2001)
- it can no longer be part of a consolidated group
- the head company is required to tell us that the subsidiary member has left the group, effective on the date it was deregistered.
We will then remove the subsidiary member from the PAYG instalments system.
Before the company is deregistered, the liquidator must ensure all relevant activity statements and tax returns are lodged, and any amount owing to us is paid.The head company of a consolidated group pays PAYG instalments for the group and its members as one entity