The Assistant Treasurer and Financial Services Minister, Bill Shorten, has released a discussion paper around the proposed changes to the income tax laws, which the Government said would make demerging and restructuring easier for consolidated groups and multiple entry consolidated (MEC) groups.
Under the new changes, if the demerged entities form a new group following a demerger undertaken by a consolidated or MEC group, the tax costs of assets held by subsidiary members of the new group will be retained.
The Government also stated that any capital gain that would otherwise arise because a demerged entity has net liabilities at the time of a demerger would be disregarded.
These changes will apply to demergers that took place after 9 November, 2010 — the date that the changes were announced in the Mid-Year Economic and Fiscal Outlook 2010-2011, the Treasury stated.
If a demerger took place on or before 9 November, 2010, any liabilities that were extinguished as a result of the demerger will be excluded from the consolidation tax cost setting calculations.
The closing date for submissions on the discussion paper is 28 January, 2011.
