Private ruling: Business reorganisation
Date of advice: 27 February 2018
Published: June 2018
Ruling period: xxxx
Date scheme commenced: 1. Companies A, B and C are Australian residents.

Ruling: Q1: Can A and B jointly choose, under section 719-50 of the Income Tax Assessment Act 1997 (ITAA 1997), to form a multiple entry consolidated (MEC) group from the date B was incorporated? | A1: Yes | Q2: Will any gain or loss made on the transfer of assets between members of the MEC group, be disregarded under the single entity rule in section 701-1 of the ITAA 1997? | A2: Yes

Relevant facts and circumstances: 1. Companies A, B and C are Australian residents. 2. Companies A, B and C are indirectly wholly owned by a non-resided entity (foreign entity D) 3. Neither company A nor company B is already a member of any MEC group or a consolidated group. 4. Companies A and B will jointly choose to form a MEC group with company A as a provisional head entity. 5. Company C will also join the MEC group. 6. Assets will be transferred within the MEC group.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 701-1 | Income Tax Assessment Act 1997 section 719-50

Reasons for decision: Summary: The non-resident entity D meets the requirements in subsection 719-20(1) and accordingly is a top company. Company A and B satisfy the conditions under subsection 719-20(1) and are tier-1 companies. Further, as subsections 719-15(3) and in turn 719-15(2) are not satisfied, companies A and B are ET-1 companies pursuant to subsection 719-15(1). Finally, neither company A nor company B is already a member of any MEC group or a consolidated group. Therefore, company A and company B may jointly choose, under section 719-50 to form a MEC group from the date B was incorporated. For income tax purposes the single entity rule (SER) deems subsidiary members to be parts of the head company rather than separate entities during the period that they are members of the consolidated group (Taxation Ruling TR 2004/11). When assets are transferred between members of the same MEC group, the SER will apply and the transfer will be treated as an intra-group transaction between members of the same MEC group. As SER applies to that intra-group transaction, within the MEC group, any gain or loss made on the transfer of the assets will be disregarded. The owner of the transferred assets before and after the transaction is company A, the provisional head company of the MEC group.