Corporate consolidation exemption
The corporate consolidation exemption in the Duties Act 2000 (the Duties Act) applies to eligible transactions resulting from legitimate consolidations of corporate groups.
The Income Tax Assessment Act 1997 (Cth) (the ITAA) allows a wholly owned corporate group to consolidate and form a single entity for income tax purposes. Where a consolidation of a corporate group requires the insertion of a new head company, the resulting transactions may be eligible for relief under the Duties Act.
For the purposes of the Duties Act, a corporate consolidation is the formation of a consolidated or consolidatable group by the interposition of a head company between a corporation that is a member of a corporate group and the shareholders or unitholders of that group. A mandatory requirement of the exemption is the provision of a copy of the choice to consolidate and confirmation of consolidation pursuant to section 703-50 of the ITAA.
Accordingly, for the corporate consolidation exemption to apply, a head company must be interposed between a corporation that is a member of an existing corporate group and the shareholders or unitholders of that group.
Importantly, the corporate consolidation exemption will not apply where the interposition of the head company has the effect of creating a corporate group which did not exist before the imposition of the head company. It will also not apply where the interposition of the head company merges two or more corporate groups or the choice to consolidate is made or arises under a section other than s703-50 of the ITAA.
Under s250DC of the Duties Act, an eligible transaction is any of the following that occurs on or after 31 March 2005:
- A transfer of dutiable property (as defined in s10(1)) from a shareholder or unitholder of a corporation to the head company.
- A vesting of dutiable property by, or as a consequence of, a court order where the property was held by a shareholder or unitholder of a corporation and is vested in the head company.
- An application to register a motor vehicle as a result of a transfer of the vehicle from a shareholder or unitholder of a corporation to the head company.
- A dutiable transaction to which s14 applies between a shareholder or unitholder of a corporation and the head company.
- A relevant acquisition to which s83 applies:
- by the head company from a shareholder or unitholder of a corporation, or
- by a shareholder or unitholder of a corporation to the head company from the head company.
- A declaration of trust relating to dutiable property the specification of which forms part of the declaration of trust or part of the transaction constituted by the declaration of trust by the head company under which the dutiable property is held on trust for a shareholder or unitholder of a corporation.
- Any other transaction resulting in the beneficial ownership of dutiable property (other than an excluded transaction) moving from a shareholder or unitholder of a corporation to the head company.
Apply for an exemption
An exemption application can be made:
- at any time before the eligible transaction occurs, or
- within three years after the eligible transaction has occurred.
The exemption will be granted if the Commissioner is satisfied that:
- The instrument or transfer is, or arises out of, an eligible transaction, and
- The eligible transaction does not arise from arrangements or a scheme devised for the principal purpose of taking advantage of the benefit of the corporate consolidation exemption, and
- The conditions of the exemption, if any, will be met by the applicant.
As foreshadowed in (c), the exemption may be granted subject to conditions binding on each member of the corporate group.
The exemption may be revoked in the circumstances described in s250DF which include where members of the relevant corporate group do not remain members of the corporate group for at least three years from the date on which the eligible transaction occurred.