Last week the Minister for Revenue and Financial Services, Kelly O’Dwyer, released the Treasury Laws Amendment (2017 Measure No. 9) Bill 2017: Consolidation along with an explanatory memorandum for public consultation.
The bill, which aims to restore integrity to the tax consolidation rules, contains six measures that address concerns raised in the Board of Taxation’s post-implementation review of the consolidation rules.
BDO tax partner, Mark Molesworth told Accountants Daily that the most significant of the amendments with the widest likely application is the exclusion of deductible liabilities from this calculation.
“This will have an immediate impact on all consolidations that have taken place since 1 July 2016. In effect, the amendment will disadvantage companies that have been consolidated since this time – which is likely to lead to higher tax outcomes for such consolidated groups,” he said.
“In many cases, particularly for innovative and early stage businesses, the largest liabilities on the balance sheet are deductible in the future (e.g. annual leave liabilities and provisions to do with ‘making good’ leased premises). Therefore, we expect this measure to have an impact on decisions about the acquisition of such companies.”
The other amendments are very technical in their nature and less likely to be run across in most transactions, but also have cause for concern according to Mr Molesworth.
“One point of some concern with these other amendments is the disparate start dates for the application of the amendments (at least five different dates between May 2013 and the date that the proposed bill is introduced),” he said.
“This leads to a confusing multitude of potential applications of the new law.”