Australia Holding Companies & Corporate Groups Guide

Australian holding company and corporate group taxation. The guide covers: the tax consolidation regime (the "tax consolidation") — the Australian tax consolidation regime allows the "wholly-owned group" of the companies (the "100% group") to be treated as the "single entity" for the tax purposes; the "head company" (the "head company" — the "top parent company" in the group) is treated as the "sole taxpayer" for the group; the "subsidiary members" (the "subsidiary members" — the "wholly-owned subsidiaries") are "pooled" with the head company; the advantages of the tax consolidation include: (a) the "single tax return" (the "consolidated tax return" — the head company lodges the single return for the group), (b) the "loss transfer" (the "loss offset" — the losses of one subsidiary are offset against the profits of the other subsidiary within the group), (c) the "inter-entity transactions" (the "intra-group transactions" are "ignored" — the "inter-entity asset transfers" do NOT trigger the CGT), (d) the "simplified compliance" (the "single franking account" — the "single franking account" for the group); the conditions for the tax consolidation — the tax consolidation is available if: (a) the "head company" is the "Australian resident" company, (b) ALL of the "subsidiaries" are the "Australian resident" companies, (c) the "head company" holds 100% of the "shares" in each subsidiary (the "100% ownership" — the "direct ownership" or the "indirect ownership through the interposed companies"), (d) the "group" elects to consolidate (the "tax consolidation election" — the "notice of the consolidation" to the ATO); the loss transfer within the group (the "loss transfer") — outside the tax consolidation, the "losses" cannot be transferred between the group companies (the "loss quarantining"); the "head company" of the consolidated group can offset the losses of one subsidiary against the profits of the other subsidiary; the "loss carry-forward" rules apply to the consolidated group (the "same business test" or the "similar business test" for the "ownership test" — the "continuity of the ownership" test for the "prior year losses"); the inter-entity dividends (the "dividend exemption") — the dividends paid between the Australian resident companies are generally "exempt" from the tax (the "inter-corporate dividend exemption" under the "Section 207-20" of the ITAA 1997); the "franked dividends" paid from the subsidiary to the parent are "non-assessable non-exempt income" (the "NANE") — the dividends are NOT included in the assessable income of the parent and the franking credits are NOT attached; the "unfranked dividends" paid from the subsidiary to the parent are also "NANE" if the parent holds at least 10% of the shares and the parent is the "Australian resident" company; the structuring of the corporate groups — the common structures for the Australian corporate groups include: (a) the "vertical group" (the "parent — subsidiary — sub-subsidiary" — the "chain structure"), (b) the "horizontal group" (the "parent — multiple subsidiaries" — the "sibling structure"), (c) the "hybrid group" (the "combination of the vertical and the horizontal structures"); the administration of the consolidated group — the head company must: (a) lodge the "consolidated tax return" (the "company tax return for the consolidated group" — the "form 2025" for the group), (b) maintain the "single franking account" (the "franking account of the head company"), (c) maintain the "tax cost setting amounts" for the assets of the subsidiaries (the "tax cost setting" — the "TCA" — the "tax cost setting" for the assets acquired by the group on the consolidation). All amounts in Australian Dollars (AUD). For related reading, see our Corporate Tax Guide → and Cross-Border Tax Guide →.

Tax Consolidation Conditions

100% ownership: The head company must hold 100% of the shares in each subsidiary (the "direct" or the "indirect" ownership through the interposed companies). The "100% ownership" must be maintained at all times during the consolidation period. If the ownership falls below 100%, the subsidiary "leaves" the consolidated group.
Single entity: The consolidated group is treated as the "single entity" for the tax purposes. The intra-group transactions (the "inter-entity transfers of the assets") are "ignored" — the CGT does NOT apply. The "tax cost" of the assets is "reset" at the time of the consolidation (the "tax cost setting" — the "TCA").

For the loss transfer within the group and the franking account consolidation, see our Corporate Tax Guide →.

Inter-Entity Dividends

Franked dividends — NANE: The franked dividends paid from the subsidiary to the parent are "non-assessable non-exempt income" (the "NANE"). The parent does NOT include the dividend in the assessable income. The franking credits are NOT passed through to the parent (the franking credits remain in the subsidiary's franking account).
Unfranked dividends — NANE: The unfranked dividends paid from the subsidiary to the parent are also "NANE" if the parent holds at least 10% of the shares. If the parent holds less than 10%, the unfranked dividends are included in the assessable income.

For the tax consolidation election and the head company obligations, see our Corporate Tax Guide →.