The Australian government has decided to introduce changes to income tax law affecting
consolidated groups. The changes relate to the way a consolidated group can deduct
the costs allocated to some assets following a corporate acquisition.
Following the recommendations of the Board of Taxation, the changes ensure
that companies inside corporate groups do not receive tax benefits which companies
outside consolidated groups are unable to receive.
Assistant Treasurer Bill Shorten stated that: "The new laws will help
protect potential threats to revenue by putting a limit on the scope of amendments
to the consolidation regime made in 2010”.
According to Shorten, the amendments are designed to address problems in the
policy proposed by the former government in 2005 (and 2007) and enacted in 2010
that affected corporate acquisitions from 2002.
The Board recommended that further investigation should be undertaken on two
issues: the treatment of liabilities under the consolidation regime and capping
the tax costs allocated to certain types of assets.
The proposed changes will depend on the time when the acquisition took place.
Corporate acquisitions that took place before May 12, 2010 will be affected
by the changes subject to the application of normal amendment periods. These
changes, says Shorten, are necessary to ensure deductions are claimed only when
intended and will "protect a significant amount of revenue that would otherwise
be at risk".
Changes for the period between May 12, 2010 and March 30, 2011 will largely
protect taxpayers who made business decisions on the basis of the current law
before the Board's review was announced, Shorten explained.
For acquisitions after March 30, 2011 changes will be made "to increase
certainty for taxpayers and apply a business acquisition approach in certain
cases," Shorten stated.
He also announced that the government will also make changes to the operation
of the taxation of financial arrangements (TOFA) rules for consolidated groups.
Shorten said that “These changes will ensure that, for consolidated groups,
the TOFA Stages 3 & 4 provisions operate as intended and that the tax treatment
of financial arrangements that are liabilities is appropriate. The changes also
address the technical issues raised by industry as part of the post-enactment
consultation on the TOFA Stages 3 & 4 regime and ease the transition of
consolidated groups into the regime.”
LAWANDTAX-NEWS.COM
