Private ruling: consolidations
Published: November 2013
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2010

Ruling: Questions and Answers | 1. Are the books of business you purchased rights to future income which are to be treated as separate assets under section 701-90 of the Income Tax Assessment Act 1997 (ITAA 1997)? | No. | 2. Are the books of business you purchased rights to amounts that are expected to be included in assessable income after the joining time under section 716-410 of the ITAA 1997? | No.

Relevant facts and circumstances: You purchased a few books of business. You are a unit trust. Your trustee is a company. You are not in a consolidated group (either as head company or as a subsidiary).

Relevant legislative provisions: Income Tax Assessment Act 1997 Part 3-90 | Income Tax Assessment Act 1997 Section 703-5 | Income Tax Assessment Act 1997 Section 703-10 | Income Tax Assessment Act 1936 Section 701-90 | Income Tax Assessment Act 1997 Section 716-410

Reasons for decision: Detailed Reasoning - Consolidations: Part 3-90 of the Income Tax Assessment Act 1997 (ITAA 1997) is concerned with the tax treatment of consolidated groups. Broadly, subsection 703-5 of the ITAA 1997 states that a consolidated group comes into existence where the head company of a consolidatable group makes an election to consolidate. A consolidatable group is defined in section 703-10 of the ITAA 1997 to consist of a single head company and all of the subsidiary members of the group. To avoid any doubt, a consolidatable group cannot consist of a head company alone. Section 701-90 allows a right to future income to be treated as separate asset under certain circumstances. Section 716-40 of the ITAA 1997 discusses rights to amounts that are expected to be included in assessable income after joining time. Sections 701-90 and 716-410 of the ITAA 1997 are both contained within Part 3-90 of the ITAA 1997. As stated previously, this part applies only to consolidated groups, so it follows the provisions of sections 701-90 and 716-410 of the ITAA 1997 also only apply to consolidated groups. You are a unit trust whose trustee is a company. You are not part of a consolidated group as either the head company or a subsidiary. As you are not part of consolidated group the provisions listed in part 3-90 of the ITAA 1997 (including sections 701-90 and 716-410) do not apply to you. Accordingly, you cannot treat a right to future income as a separate asset upon your purchase of the books of business, nor do the purchases create a right to amounts that are expected to be included in assessable income after the joining time.