Draft Australian tax legislation would close loopholes in consolidation regime

Australia’s Treasury on April 28 released an exposure draft of tax legislation designed to plug loopholes in the consolidation regime.

According to a release accompanying the draft, the legislation covers the following measures announced in the 2013–14 and 2014–15 budgets:

• remove a double benefit (or double detriment) that can arise in respect of certain liabilities held by a joining entity that is acquired by a consolidated group;
• remove anomalies that arise when an entity joins or leaves a consolidated group where the entity has securitised an asset;
• prevent the tax costs of a joining entity’s assets from being uplifted where no tax is payable by a foreign resident owner on the disposal of the joining entity in certain circumstances;
• clarify the operation of the Taxation of Financial Arrangements provisions when certain intra‑group assets or liabilities emerge from a consolidated group because a subsidiary member leaves the group; and
• remove anomalies that arise when an entity leaves a consolidated group holding an asset that corresponds to a liability owed to it by the old group because the value of the asset taken into account for tax cost setting purposes is not always appropriate.

Comments are requested on the draft by May 19.

See:

• Exposure Draft
• Explanatory Material
• Release