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WHAT IS CONSOLIDATION? WHAT ARE THE ELIGIBILITY CRITERIA FOR CONSOLIDATION?

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24
May

Consolidation is treated as a group of wholly owned or majority-owned companies that can operate as a single entity for income tax purposes. The purpose of consolidation is to decrease the organisational costs and compliance cost but improve the business structure and integrity of the tax system. However, consolidation can also be achieved without the integration of all tax characteristics and the transition of a group into one homogenous taxable entity.

Eligibility for Head Company

  • Company must be an Australian resident but not a prescribed dual resident;
  • Company must not be a subsidiary member of another consolidated group;
  • Company must have at least some of its taxable income taxed at general rate; 
  • Company must not be a head company of a tax consolidated group, such as exempt entities, certain credit union, pooled development funds (PDFs), film licensed investment companies.

Subsidiary Member Eligibility Criteria

  • Must be a company, trust, a resident trust estate or a resident unit trust, or partnership business but non-profit companies cannot become members of a consolidated group;  
  • Must be wholly owned by the head company either directly or indirectly. According to the consolidation provisions, the 100% ownership requirement may be met, even though the group companies do not hold a 100% stake in a company’s shares; 
  • Must be 100% subsidiary of the head company and must have the legal form of an Australian resident but not dual resident;
  • Must have all or some of its taxable income taxed at general rate.

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