Consolidation Reference Manual
You can still refer to the Consolidation reference manual for consolidation information that has not been impacted by changes in the legislation.
C7 Making a choice in writing - and notifying
C7-1 General Information
C7-1-110 Choice in writing
| Key points |
|
Effective from 1 July 2002, the following choices must be made in writing:
There is no requirement to give the written choice to the Commissioner but it must be kept for record keeping purposes. The relevant information about the choice must be notified to the Commissioner in the approved form. |
Background
Legislative amendments to the provisions covering how a choice is made to form a consolidated group or MEC group (and certain other choices relevant to these groups) were enacted on 3 June 2010, with effect from 1 July 2002.
Before the amendments were enacted, to be effective a choice had to be made in the approved form and given to the Commissioner. The amendments require the choice to be made in writing but there is no requirement for the written choice to be given to the Commissioner. However, the relevant information about the choice must be notified to the Commissioner in the approved form.
→ 'Consolidated groups - notices to be given to the Commissioner', C7-1-120 ; 'MEC groups - notices to be given to the Commissioner', C10-1-110
Option to apply changes from 10 Feb. 2010
The amendments apply from 1 July 2002 unless a separate choice is made by the head company or provisional head company of a group to apply the changes from 10 February 2010. This choice must be made in writing on or before 30 June 2014 or within such further time allowed by the Commissioner.
Choices must be in writing
There are five choices that must be made in writing:
- 1.
- Choice to form a consolidated group → subsection 703-50(1), Income Tax Assessment Act 1997 (ITAA 1997)
- 2.
- Choice to form a MEC group → subsection 719-50(1), ITAA 1997
- 3.
- Choice that a special conversion event takes place to create a MEC group from a consolidated group → subsection 719-40(1), ITAA 1997
- 4.
- Choice that a new eligible tier-1 company becomes a member of a MEC group → subsection 719-5(4), ITAA 1997
- 5.
- Choice to appoint a new provisional head company (PHC) following a cessation event happening to the former PHC → subsection 719-60(3), ITAA 1997
Valid choice in writing
For a choice in writing to be valid there needs to be a written document stating:
- •
- the choice being made
- •
- the entities making the choice
- •
- the date the choice was made, and
- •
- any other particulars specifically required by the choice provisions.
The specific particulars required for making a valid choice in writing for each type of choice are listed in table 1.
Each choice provision specifies which entity or entities can make the choice, and this information must be evident in the choice documents. For example, the choice to form a MEC group or to appoint a new PHC after formation must be made in writing jointly by all the eligible tier-1 companies of the group at the relevant time.
It is necessary that the choice in writing document is signed and dated by the public officer of each entity required to make the choice as specified in the relevant choice provisions.
The head company must keep the written choice to meet the statutory record-keeping requirements. → 'Record keeping guidelines and checklist', C9-2
Time period for making and notifying a choice
The choice must be made within the time period specified in the relevant choice provision. Note that the Commissioner does not have any discretion to extend the time period for making a choice in writing.
The choice to form a consolidated or MEC group or create a MEC group from a consolidated group may be made up to the day the head company lodges the income tax return for the income year in which the day specified in the choice occurs - or, if a return is not required for that income year, the date it would have otherwise been due. The choice must be notified to the Commissioner within the same time period.
Similarly, the choice for a new eligible tier-1 company to become a member of a MEC group may be made up to the day the head company lodges the income tax return for the income year in which the company becomes an eligible tier-1 company of the top company - or, if a return is not required for that income year, the date it would have otherwise been due. The choice must be notified within the same time period.
The time period for making a choice to appoint a new PHC of a MEC group depends on when the cessation event occurs, that is when the former PHC became ineligible. If the cessation event occurs more than 28 days before the notice of formation has been lodged with the ATO, the choice must be made and notified by the time the formation notice is given. Otherwise, the choice must be made and notified within 28 days of the cessation event.
Specific requirements
Table 1 summarises the specific requirements for each type of choice.
| Type of choice | Who can make choice | Particulars required in written choice | Time period for making the choice |
|---|---|---|---|
| 1. Choice to form a consolidated group
→ subsection 703-50(1) |
Head company |
A statement that the consolidated group has formed, including:
The statement must be signed by the public officer of the head company |
Up to the day the head company lodges the income tax return for the income year in which the day specified in the choice occurs - or, if a return is not required for that income year, the date it would have otherwise been due. → subsection 703-50(3) |
| 2. Choice to form a MEC group
→ subsection 719-50(1); subsection 719-60(1) |
Eligible tier-1 companies of the potential MEC group |
A statement that a MEC group has formed, including:
The statement must be signed by the public officer of each eligible tier-1 company |
As above
→ subsection 719-50(3) |
| 3. Choice that a special conversion event takes place to create a MEC group from a consolidated group
→ subsection 719-40(1) |
Head company of consolidated group |
A statement that the MEC group came into existence at the time the specified companies became eligible tier-1 companies of the top company including:
The statement must be signed by the public officer of the head company of the consolidated group |
As above
→ subsection 719-40(2) |
| 4. Choice that a new eligible tier-1 company becomes a member of the MEC group
→ subsection 719-5(4) |
Provisional head company |
A statement that a new eligible tier-1 company became a member of the MEC group at the time it became an eligible tier-1 company of the top company including:
The statement must be signed by the public officer of the PHC |
Up to the day the head company lodges the income tax return for the income year in which the company became an eligible tier-1 company of the top company - or, if a return is not required for that income year, the day it would have otherwise been due
→ subsection 719-5(6) |
| 5. Choice to appoint a new provisional head company after formation of a group
→ subsection 719-60(3) |
Eligible tier-1 members of the MEC group immediately after the cessation event |
A statement that a new PHC has been appointed jointly by the eligible tier-1 members with effect from immediately after the cessation event, including:
The statement must be signed by the public officer of each eligible tier-1 company |
Within 28 days of the cessation event - or, if the cessation event occurs more than 28 days before the notification of the MEC group's formation is lodged, by the time the formation notice is lodged |
References
Income Tax Assessment Act 1997 : subsections 703-50(1) , 703-50(3) , 719-5(4) , 719-5(6) , 719-40(1) , 719-40(2) , 719-50(1) , 719-50(3) 719-60(1) and 719-60(3) ; as amended by Tax Laws Amendment ( 2010 Measures No. 1 ) Act 2010 (No. 56 of 2010), Schedule 5, Part 18
Explanatory Memorandum to Tax Laws Amendment (2010 Measures No. 1) Bill 2010, paragraphs 5.369 to 5.427
History
Revision History
Section C7-1-110 first published 6 May 2011.
Current at 6 May 2011