Under consolidation, only the head company needs to operate attribution accounts and attributed tax accounts for the purposes of the FIF measures during the period of consolidation.
The pre-consolidation balances of the attribution accounts and attributed tax accounts of subsidiary members of the group are transferred to the head company so it can use any pre-consolidation surpluses during consolidation.
The attribution and attributed tax accounts of subsidiary members of a consolidated group become inoperative during the period of consolidation once the balances in those accounts have been transferred to the head company.
The attribution and attributed tax account surpluses are transferred to the head company so that future distributions of income received from an attribution entity - for example, a FIF - are not assessed to the head company to the extent that the income was previously attributed to the joining company.
When a company with an interest in a FIF leaves a group, a proportion of the head company's attribution and attributed tax account surpluses that leave the group with the leaving company are transferred to the leaving company.
The date of effect of the provisions relating to attribution accounts and attributed tax accounts is 1 July 2002. These provisions are in the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002.
Subdivisions 717-F and 717-G of the ITAA 1997 concern elections made under Part XI (the FIF measures) of the ITAA 1936 where entities become subsidiary members of a consolidated group and where members leave a group.
These subdivisions ensure that the entry history rule in Part 3-90 of the ITAA 1997 does not adversely affect the head company's ability to make elections in relation to its interests in FIFs. Similarly, they ensure the exit history rule in Part 3-90 does not adversely affect the leaving company's ability to make elections in relation to interests in FIFs that the leaving company takes with it on exit.