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Consolidation for income tax purposes

Last updated 3 December 2018

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.

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