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Edited version of your written advice
Authorisation Number: 1012807497367
Ruling
Subject: Restructure of consolidated group to MEC group
Question 1
Provided paragraph 719-40(1)(e) of the Income Tax Assessment Act 1997 (ITAA 1997) is complied with, does a special conversion event happen at the time that AusCo 1 disposes of AusCo 2 to ForeignCo 1 under the restructure?
Answer
Yes.
Question 2
Will AusCo 1 income tax consolidated group cease to exist under paragraph 703-5(2)(b) of the ITAA 1997 if a MEC group comes into existence as a result of the special conversion event happening ?
Answer
Yes.
Question 3
When AusCo 2 acquires a portion of the membership interests in AusCo 1 after the MEC group comes into existence, will AusCo 2 be eligible to be appointed under subsection 719-60(3) of the ITAA 1997 as the provisional head company of the MEC group?
Answer
Yes.
Question 4
Will AusCo 2 be the head company of the MEC group that came into existence at the end of the 2015 income year, as determined by subsection 719-75(2) of the ITAA 1997?
Answer
Yes.
Question 5
Will paragraph 719-120(1)(b) of the ITAA 1997 be satisfied such that Subdivision 719-BA of the ITAA 1997 applies to the MEC group that came into existence?
Answer
Yes.
Question 6
Will the loss utilisation rules in sections 719-305, 719-310, 719-315, 719-320 and 719-325 of the ITAA 1997 apply to the MEC group that came into existence?
Answer
No.
This ruling applies for the following period:
The 2014-15 income year.
The scheme commences on:
The start date of the restructure, being a time in the 2014-15 income year.
Relevant facts and circumstances
1. AusCo 1 and AusCo 2 are:
(a) Australian resident companies
(b) not prescribed dual residents as defined in s 6(1) of the Income Tax Assessment Act 1936, and
(c) not entities of the type specified in section 703-20 of the Income Tax Assessment Act 1997.
2. AusCo 1 is wholly-owned by ForeignCo 1 (a non-resident company) and ultimately owned by ForeignCo 2 (a non-resident company).
3. AusCo 1 is the head company of the 'AusCo 1 income tax consolidated group', which has group losses.
4. Prior to the restructure, AusCo 2 is a wholly-owned subsidiary of AusCo 1 and a member of the AusCo 1 income tax consolidated group.
Restructure
5. Membership interests in AusCo 2 will be transferred from AusCo 1 to ForeignCo 1 at 'the transfer time'. The transfer will be at market value.
6. At least one day after the Transfer Time, AusCo 2 will acquire a portion of membership interests in AusCo 1 for market value.
7. All steps of the proposed restructure occur in the 2014-15 income tax year.