ATO ID 2004/354: Consolidation - choice to consolidate - cannot amend date specified in effective choice
Date of decision: 18 December 2003
Year of income: Year ended 30 June 2003
Business line: Consolidation Centre of Expertise

Issue
Where an entity has made a choice to consolidate in accordance with subsection 703-50(1) of the Income Tax Assessment Act 1997 (ITAA 1997), can the date specified in the choice be changed if the group discovers that it was able to consolidate from a date earlier than the date notified to the Commissioner?

Decision
No - subsection 703-50(2) of the ITAA 1997 expressly states that the date of consolidation specified in the choice cannot be amended, once a company has notified the Commissioner of an effective choice to form a consolidated group under subsection 703-50(1) of the ITAA 1997.

Facts
A head company provided the Commissioner with its choice to form a consolidated group with effect from 1 July 2003. The choice was made in accordance with subsection 703-50(1) of the ITAA 1997. All of the information recorded in the notice is correct. That is, it contains everything required to be included in the approved form, accurately identifies all the members of the group and accurately reflects the decision of the head company's directors to consolidate from 1 July 2003. Since making the choice, the head company has discovered that the group was in fact eligible to consolidate from an earlier date than that specified in the choice provided to the Commissioner. The head company wishes to change the date of effect to that earlier date.

Reasons for decision
Summary: Subsection 703-50(1) of the ITAA 1997 sets out the conditions for making a choice to consolidate: Subsection 703-50(2) of the ITAA 1997 provides that the date of effect specified in the choice cannot be amended once an effective choice to consolidate has been made in accordance with subsection 703-50(1) of the ITAA 1997. Where a choice to consolidate has been made in accordance with subsection 703-50(1) of the ITAA 1997 but the Commissioner is satisfied that the choice contains information that is incorrect in a material particular, the combined effect of subsections 703-50(5) and (6) of the ITAA 1997 is that the choice has no effect unless the Commissioner gives the company written notice that the choice is effective. However, the Commissioner is not able to give effect under subsection 703-50(6) to a notice which does not satisfy the conditions of subsection 703-50(1) of the ITAA 1997. In this case, the head company has made the choice to consolidate in accordance with subsection 703-50(1) of the ITAA 1997. That is, the choice contained everything required in the approved form and correctly identified all members of the consolidated group. Further, the Commissioner is satisfied that, even though a consolidatable group existed at an earlier date, the choice contains no materially incorrect information because it accurately reflects the decision of the head company's directors to consolidate from 1 July 2003. Accordingly, the head company is bound by its choice to consolidate with effect from 1 July 2003.

Legislative references: Income Tax Assessment Act 1997 subsection 703-50(1) subsection 703-50(2) subsection 703-50(3) subsection 703-50(5) subsection 703-50(6)
Related ATO interpretative decisions: ATO ID 2004/356
Subject references: Consolidation - formation Formation time Head Company