INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 719 - MEC groups  

Subdivision 719-B - MEC groups and their members  

Basic concepts

SECTION 719-10   What is a potential MEC group?  

719-10(1)  


A potential MEC group derived from one or more *eligible tier-1 companies of a *top company consists of the following members:


(a) those eligible tier-1 companies;


(b) all of the other entities (if any) which:


(i) meet the requirements of the table; or

(ii) are entities for which the requirements in section 701C-10 of the Income Tax (Transitional Provisions) Act 1997 are met; or

(iii) are entities for which the requirements in section 701C-15 of the Income Tax (Transitional Provisions) Act 1997 are met.


Graphic
Graphic
Requirements for other entities
Column 1 Column 2 Column 3
Income tax treatment requirements Australian residence requirements Ownership requirements
The entity must be a company, trust or partnership and, if it is a company, all or some of its taxable income (if any) must have been taxable at a rate that is or equals the *corporate tax rate apart from this Part

The entity must not be covered by an item in the table in section 703-20

The entity must not be a non-profit company (as defined in the Income Tax Rates Act 1986)
The entity must:

(a) be an Australian resident (but not a *prescribed dual resident), if it is a company; or

(b) meet the conditions in item 1, 2 or 3 of the table in section 703-25, if it is a trust; or

(c) be a partnership
The entity must be:

(a) a *wholly-owned subsidiary of any of those *eligible tier-1 companies; or

(b) an entity that would be covered by paragraph (a), if it were assumed that all of the membership interests that are beneficially owned by any of those eligible tier-1 companies were owned by a single one of those eligible tier-1 companies

719-10(2)  
For the purposes of column 3 of the table, if there are one or more entities interposed between an entity (the test entity ) and an eligible tier-1 company, the test entity can be a wholly-owned subsidiary of the eligible tier-1 company only if each of the interposed entities:


(a) meets the conditions in columns 1 and 2 of the table; or


(b) holds membership interests only as a nominee of one or more entities each of which is:


(i) an eligible tier-1 company of the top company; or

(ii) a wholly-owned subsidiary of an eligible tier-1 company of the top company, being a subsidiary that meets the conditions in columns 1 and 2 of the table.

719-10(3)  
For the purposes of subparagraph (2)(b)(ii), in determining whether an entity is a wholly-owned subsidiary of an eligible *tier-1 company of the *top company, assume that all of the *membership interests that are beneficially owned by eligible tier-1 companies of the top company were owned by a single eligible tier-1 company of the top company.

719-10(4)  
(Repealed by No 67 of 2003)

719-10(5)  


(Repealed by No 67 of 2003) Only one eligible tier-1 company in a potential MEC group

719-10(6)  
To avoid doubt, if:


(a) there is only one *eligible tier-1 company of a *top company; and


(b) there are no entities which meet the requirements of the table in subsection (1); and


(c) there are no entities for which the requirements mentioned in subparagraph (1)(b)(ii) are met; and


(d) there are no entities for which the requirements mentioned in subparagraph (1)(b)(iii) are met;

the *potential MEC group derived from the eligible tier-1 company consists of the eligible tier-1 company alone.

When potential MEC group ceases to exist

719-10(7)  
If a *potential MEC group is derived from one or more *eligible tier-1 companies of a *top company, the potential MEC group ceases to exist when:


(a) none of those companies are eligible tier-1 companies of the top company; or


(b) there is a change in the identity of the top company, and the eligible tier-1 companies that were members of the group immediately before the change are not the same as the eligible tier-1 companies that are members of the group immediately after the change. Continuity of potential MEC group

719-10(8)  
If:


(a) a *potential MEC group is derived from one or more *eligible tier-1 companies of a *top company; and


(b) there is a change in the identity of the top company in relation to the potential MEC group; and


(c) the eligible tier-1 companies that were members of the group immediately before the change are the same as the eligible tier-1 companies that are members of the group immediately after the change;

the change does not affect the continuity of:


(d) the group; or


(e) the status of any of those companies as eligible tier-1 companies of the top company.


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