Treasury Laws Amendment (Income Tax Consolidation Integrity) Act 2018 (14 of 2018)

Schedule 1   Consolidation

Part 1   Deductible liabilities

Income Tax Assessment Act 1997

1   Before subsection 705-70(2)

Insert:

Exclusion for deductible liability

(1AA) Subsection (1AB) applies if:

(a) the accounting liability is covered by subsection (1AC); and

(b) assuming that the *head company had made a payment to discharge the accounting liability to the extent that it is covered under that subsection just after the joining time, that payment would result in an amount equal to all or part of the accounting liability being a deduction to the head company of the group.

(1AB) An amount is not to be added for the accounting liability under subsection (1) to the extent of that deduction.

(1AC) A liability is covered by this subsection except to the extent that:

(a) any of the following provisions apply in relation to the liability:

(i) section 713-520 (certain liabilities etc. of life insurance company that joins a consolidated group);

(ii) section 715-375 (accounting liabilities that are, or are part of, a Division 230 financial arrangement held by an entity that joins a consolidated group); or

(b) section 713-515 (certain assets taken to be retained cost base assets where life insurance company joins a consolidated group) applies in relation to an asset to which the liability relates; or

(c) the liability is any of the following:

(i) the outstanding claims liability of a *general insurance company, or a private health insurer (within the meaning of the Private Health Insurance (Prudential Supervision) Act 2015), under *general insurance policies;

(ii) the unearned premium liability of a general insurance company, or a private health insurer (within the meaning of that Act), under general insurance policies;

(iii) the unexpired risk liability of a general insurance company, or a private health insurer (within the meaning of that Act), under general insurance policies; or

(d) the liability arises under any of the following:

(i) a *retirement village residence contract;

(ii) a *retirement village services contract.

(1AD) To avoid doubt, for the purposes of paragraph (1AC)(c), section 713-710 (certain liabilities, reserves, costs etc. of general insurance company that joins or leavesa consolidated group) does not affect the amount of the liability.