Australia's Consolidation Regime: A Road of No Return?

Abstract

Australia’s consolidation regime is the world's first "asset-based" model under which multiple levels of ownership in a corporate group are collapsed into one: a bold attempt to deal with the dual cost bases issue. Compared with the consolidation regimes in other countries, the Australian regime represents the strongest application of the enterprise doctrine to date, under which a corporate group is treated as one single entity for income tax purposes. Under this strong single entity concept, the important tax attributes of a subsidiary are changed permanently once it joins a consolidated group. Now that the regime has matured after operating for seven years, it is an appropriate time to reflect and draw lessons from the experience. This article argues that, in contrast to other countries' consolidation regimes, the Australian regime provides some unusual attractions under its unique asset-based model. However, the price to pay for these advantages - namely the problems and complexity associated with them - is high, perhaps too high to be acceptable as a model for other countries.

Keywords: tax consolidation; taxation of corporate groups; Australia; corporation tax; groups of companies