ATO ID 2003/1180: Consolidation - entity rules - not subsidiary for whole year
Date of decision: 26 September 2003
Business line: Consolidation Centre of Expertise

Issue
Is there a de minimis period in respect of section 701-30 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
No. There is no de minimis period in respect of section 701-30 of ITAA 1997. If an entity is not a member of the consolidated group for the whole of the income year the entity is obliged to calculate its income tax position for the non-membership period even if that period is only one day.

Facts
Subsidiary company has been in existence for some years. Subsidiary company becomes a subsidiary member of the consolidated group on 2 July 2004. Both the head company and the subsidiary company are 30 June balancing companies.

Reasons for decision
Summary: Subsection 701-30(2) of the ITAA 1997 states that it has effect for the entity core purposes if: Subsidiary company is not a member of the consolidated group on 1 July 2004. Thus, it has a non-membership period of one day, as it was not a subsidiary member of the group for the entire income year. There is no provision in section 701-30 that allows for a de minimis period or creates an exception to the non-membership period as defined in paragraph 701-30(2)(b) of the ITAA 1997. Accordingly, the subsidiary company will be required to calculate its tax position in respect of the period of the year in which it was not a member of a consolidated group.

Legislative references: Income Tax Assessment Act 1997 section 701-30 subsection 701-30(2) paragraph 701-30(2)(b)
Subject references: Consolidation Entity rules Membership Non-membership period