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Edited version of your private ruling
Authorisation Number: 1012553842627
Ruling
Subject: consolidations
Questions and Answers
1. Are the books of business you purchased rights to future income which are to be treated as separate assets under section 701-90 of the Income Tax Assessment Act 1997 (ITAA 1997)?
No.
2. Are the books of business you purchased rights to amounts that are expected to be included in assessable income after the joining time under section 716-410 of the ITAA 1997?
No.
This ruling applies for the following periods:
Year ended 30 June 2011
Year ended 30 June 2012
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You purchased a few books of business.
You are a unit trust. Your trustee is a company. You are not in a consolidated group (either as head company or as a subsidiary).
Relevant legislative provisions
Income Tax Assessment Act 1997 Part 3-90
Income Tax Assessment Act 1997 Section 703-5
Income Tax Assessment Act 1997 Section 703-10
Income Tax Assessment Act 1936 Section 701-90
Income Tax Assessment Act 1997 Section 716-410
Reasons for decision
Consolidations
Part 3-90 of the Income Tax Assessment Act 1997 (ITAA 1997) is concerned with the tax treatment of consolidated groups. Broadly, subsection 703-5 of the ITAA 1997 states that a consolidated group comes into existence where the head company of a consolidatable group makes an election to consolidate. A consolidatable group is defined in section 703-10 of the ITAA 1997 to consist of a single head company and all of the subsidiary members of the group. To avoid any doubt, a consolidatable group cannot consist of a head company alone.
Section 701-90 allows a right to future income to be treated as separate asset under certain circumstances. Section 716-40 of the ITAA 1997 discusses rights to amounts that are expected to be included in assessable income after joining time. Sections 701-90 and 716-410 of the ITAA 1997 are both contained within Part 3-90 of the ITAA 1997. As stated previously, this part applies only to consolidated groups, so it follows the provisions of sections 701-90 and 716-410 of the ITAA 1997 also only apply to consolidated groups.
You are a unit trust whose trustee is a company. You are not part of a consolidated group as either the head company or a subsidiary. As you are not part of consolidated group the provisions listed in part 3-90 of the ITAA 1997 (including sections 701-90 and 716-410) do not apply to you. Accordingly, you cannot treat a right to future income as a separate asset upon your purchase of the books of business, nor do the purchases create a right to amounts that are expected to be included in assessable income after the joining time.
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