Consolidation Reference Manual

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C10 MEC groups

C10-2 Worked example

Formation and conversion

C10-2-140 A consolidated group is created from a MEC group

Description

This example explains the conditions under which a consolidated group is created from a multiple entry consolidated (MEC) group.

Commentary

A consolidated group is created from a MEC group where the MEC group has a single eligible tier-1 company (which is the provisional head company) and that company fails to satisfy the conditions for continuing as an eligible tier-1 company but satisfies the conditions to be a head company of a consolidated group. → 'Choosing', B1-1

The company becomes the head company of the consolidated group, and the subsidiary members of the MEC group (if any) become subsidiary members of the consolidated group.

→ 'Group conversions', C10-1-210

Example

Figure 1 shows a MEC group where the provisional head company, ACo, no longer qualifies as an eligible tier-1 company due to some of its membership interests being acquired by UE, an unrelated entity. Because there are no other eligible tier-1 companies, the MEC group ceases to exist.

However, as ACo is eligible to be its head company, the group will become a consolidated group, with all the subsidiary members of the MEC group (S2 and S3) becoming subsidiary members of the consolidated group.

Figure 1: Conversion of MEC group to consolidated group

References

Income Tax Assessment Act 1997 , sections 703-55; as amended by New Business Tax System (Consolidation) Act (No. 1) 2002 (No. 68 of 2002), Schedule 1

Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002, paragraphs 3.13 and 3.14

Income Tax Assessment Act 1997 , Subdivision 719-BA; as inserted by Tax Laws Amendment (2010 Measures No. 1) Act 2010 (No. 56 of 2010), Schedule 5, Part 2

Explanatory Memorandum to the Tax Laws Amendment (2010 Measures No. 1) Bill 2010, paragraphs 5.65 - 5.100 and 5.105 - 5.108

History

Revision history

Section C10-2-140 first published (excluding drafts) 2 December 2002.

Further revisions are described below.

Date Amendment Reason
26.10.05 Minor changes. For clarification.
6.5.11 Revisions to reflect changes to the cost setting rules when groups convert. Legislative amendments.

Current at 6 May 2011

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