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Business given one year’s break on tax consolidation

COMPANIES operating through group structures have been given an extra year to come to terms with the Federal Government’s tax consolidation regime.

The Government is going ahead with its plan to introduce the consolidation regime on July 1, but inter-group tax arrangements will continue to operate until July 1, 2004.

Lucrative transitional arrangements that will allow companies to gain the best tax valuation on their assets also will continue to run until 2004.

It was initially understood that there would only be a one-year transitional period, but the first tranche of consolidation legislation introduced into parliament this month has extended the deadline.

The new legislation gives business the first indication of how the consolidation regime will operate and outlines laws governing things such as how to bring a new entity into a consolidated structure.

However, the rules on how to consolidate an existing group structure are yet to come – probably in June.

Ernst and Young tax partner Peter Hills said the extension of the transition period was good news for business because it removed some of the urgency from the situation.

“There may be some benefits for companies to get in early but that can only really be determined when the next set of rules is released,” Mr Hills said.

“Groups need to review their situation once the full set of consolidation rules has been released.”

Allens Arthur Robinson special counsel Jeff Tyler said businesses were still in the same place they were a few months ago in regards to the overall consolidation picture but this did not mean they should be doing nothing.

“Businesses operating through group structures should still be doing some planning with the rules they have available to them,” Mr Tyler said.

“The biggest issue they need to be looking at is what does it mean for their business.

“There are some rules on the treatment of losses that they need to consider.”

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