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Chapter 25: A case for consolidation

Current arrangements

Special provisions apply for wholly owned group companies, resulting in a mix of grouping and separate company treatment. Some transactions within wholly owned company groups are not ignored, others can be. This structure gives rise to:

  • high compliance costs;
  • impediments to the commercial restructuring of wholly owned company groups;
  • potential double taxation of single economic gains;
  • schemes that enable companies to duplicate and cascade tax losses; and
  • CGT value-shifting problems.
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A strategy for reform

Within consolidation

To achieve a fairer system by taxing groups as single entities. This would:
  assist business through reduced compliance costs;   reduce impediments to group restructuring;   promote greater equity by:
   - eliminating double
     taxation; and
   - preventing loss
     duplication and
     value shifting.

Outside consolidation

To remove gain and loss duplication and to prevent value shifting.

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Key policy issues How to move to a framework for consolidation? How to determine a cost base for disposal of equity? How to move towards single recognition of gains and losses? How to move towards a systemic solution to value shifting?
See Chapter 26 See Chapter 27 See Chapter 28 See Chapter 29