Wholly owned corporate groups may have the option of consolidating for income tax purposes. 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 PAYG instalments.
When a group consolidates, it is a 'one in, all in' situation, in which all of the head company's eligible wholly-owned subsidiary members become part of the group.
The following entities (which receive special tax treatment compared with ordinary Australian-resident companies) cannot be a head company or subsidiary member of a consolidated group:
- exempt entities (that is, total ordinary and statutory income is exempt)
- pooled development funds
- film licensed investment companies
- certain credit unions.
Other entities specifically excluded from being a subsidiary member of a consolidated group are:
- not-for-profit companies
- trusts that are complying and non-complying superannuation entities
- trusts that are non-complying approved deposit funds.
While a not-for-profit company can be the head company of a consolidated group, it cannot be a subsidiary member.