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Edited version of your written advice
Authorisation Number: 1012851827184
Date of advice: 31 July 2015
Ruling
Subject: Deferral of the head company's due time relating to group liability
Question
For the purposes of section 721-25(1) of the Income Tax Assessment Act 1997 (ITAA 1997), is the head company's due time for ACo in relation to its income tax liabilities for the income years ending 30 June 2013, 2014, 2015 and 2016 the time as deferred by the Commissioner under section 255-10 of Schedule 1 to the Taxation Administration Act 1953 (TAA)?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
ACo is head company of a consolidatable group.
ACo exercises a valid choice to form a consolidated group.
The Commissioner of Taxation exercises his discretion under section 255-10 of Schedule 1 to the TAA to defer the due and payable date for ACo's income tax liabilities beyond the date they would otherwise be taken to have been due and payable under section 5-5 of the ITAA 1997.
ACo enters into an otherwise valid tax sharing agreement with one or more of its wholly-owned subsidiaries at a time that is after the date that the income tax would have been taken to be due and payable under section 5-5 of the ITAA 1997 but before the date it is due and payable by virtue of the exercise of the Commissioner's discretion.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 5-5
Income Tax Assessment Act 1997 Section 703-15
Income Tax Assessment Act 1997 Section 703-50
Income Tax Assessment Act 997 Section 721-10
Income Tax Assessment Act 1997 Section 721-15
Income Tax Assessment Act 1997 Section 721-25
Income Tax Assessment Act 1997 Section 721-30
Taxation Administration Act 1953 Section 255-10 of Schedule 1
Reasons for decision
In the ordinary course of events, the head company of a consolidated group is the entity that is liable to pay certain 'tax-related liabilities' (called 'group liabilities') such as income tax for the group. Division 721 of the ITAA 1997 operates to secure payment of such a liability where the head company fails to meet the liability by the time it becomes due and payable, called the 'head company's due time' for the liability. (Refer section 721-10 of the ITAA 1997).
The Division operates by making the head company and its subsidiary members jointly and severally liable to pay a group liability that is unpaid at the head company's due time for that liability. The liability arises just after the head company's due time. (Refer section 721-15 of the ITAA 1997).
However, subsection 721-15(3) of the ITAA 1997 provides that this joint and several liability does not arise where the group liability is covered by a 'tax sharing agreement' (TSA). Subsection 721-25(1) of the ITAA 1997 states that for the purposes of the Division, a group liability is covered by a TSA if just before the head company's due time, there is an agreement between the head company and one or more of its subsidiary members, called 'TSA contributing members', that provides for the determination of a particular amount (the 'contribution amount') for each TSA contributing member in relation to the group liability, with such amounts representing a reasonable allocation of the total amount of the group liability among the head company and the TSA contributing members.
Subject to certain exceptions, each TSA contributing member is liable to pay to the Commonwealth an amount equal to the contribution amount for that member in relation to the group liability. That liability arises just after the head company's due time. (Refer section 721-30 of the ITAA 1997).
Where the Commissioner defers the time by which a group liability becomes due and payable under section 255-10 of Schedule 1 to the TAA, it is that deferred time that is the head company's due time for the liability.
Therefore, for the purposes of subsection 721-25(1), the tax sharing agreement will exist just before ACo's due time for the income tax liabilities.
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