Kelly O'Dwyer (Higgins, Liberal Party, Minister for Revenue and Financial Services) Share this | Hansard source

Firstly, I would like to thank those members who have contributed to this debate. This bill amends the Income Tax Assessment Act 1997 to improve the integrity and operation of the tax consolidation regime. There are around 12,000 consolidated taxpayers in Australia, including the majority of Australia's largest businesses. The consolidation regime allows a wholly owned corporate group to be treated as a single entity for income tax purposes. This not only improves the integrity of the tax system but also reduces compliance costs for businesses and removes impediments to group restructuring and efficient business practices.

While the consolidation regime works well in general, the government is making changes to remove loopholes and improve the fairness and operation of the business tax system. The government is introducing changes to prevent a double tax benefit from arising when an entity holing a deductible liability joins a consolidated group. The bill will also prevent a double tax benefit from arising when an entity joins or leaves a consolidated group where the entity has securitised an asset.

To reduce the circumstances in which tax outcomes differ from commercial outcomes, this bill will simplify the operation of the entry and exit tax cost setting rules by ensuring that deferred tax liabilities are disregarded. This bill closes a loophole that allows consolidated groups to access double deductions by shifting value across entities in a consolidated group. Nonresidents will also be prevented from churning assets within related corporation groups to access double deductions.

Finally, the bill will ensure that the tax treatment of certain intragroup liabilities and assets between a continuing member of a consolidated group and an existing member of a consolidated group is consistent with the economic substance of the relevant transaction. This will clarify the interaction between the consolidation regime and the taxation of financial arrangements regime.

We have consulted widely over a number of years to ensure that these changes operate as intended, and fairly balance the need for additional integrity without unduly burdening business with compliance costs. These changes demonstrate the government's commitment to improving the fairness, integrity and effectiveness of the business tax system. I commend the bill to the House.

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