Company consolidation allows a group of companies 100% owned by the same shareholders to be treated as a single entity for tax. This single group of companies is known as a consolidated group.
What consolidated companies can do
Consolidated companies can do the following:
- transfer assets within the consolidation group, and defer income tax liabilities
- pay exempt dividends between companies
- claim deductions for administration and other costs of holding companies that may not have been available to the individual company
- use losses incurred by group members as though they are losses of the group, subject to continuity requirements
- offset imputation credits within the group.
Consolidation eligibility
All companies forming the consolidated group must be 100% commonly owned. This is called a wholly-owned group of companies.
A company is eligible to be part of a consolidated group if:
- it is a New Zealand resident company
- it is incorporated in New Zealand or carrying on a business in New Zealand through a fixed establishment.
A New Zealand tax resident that is also a tax resident in another country can be a member of a consolidated group of companies.
A company is not eligible to be part of a consolidated group if:
- it only derives exempt income
- it is a look through company
- it is a member of another consolidated group.
Qualifying companies, or mineral miner companies, can only be grouped with other companies of the same type.
Forming a consolidated group
For it to apply to the current year, we must be notified of an election to form a consolidated group within 63 working days of:
- For existing companies - the start of an income year.
- For new companies - the date of the latest incorporation.
- For newly eligible companies - the first date of eligibility.
Elections made outside of this will not apply until the start of the following income year. However, a company may apply for an extension to the 63 working day rule if the notice could not reasonably have been provided within that time.
An election notice must be in writing and contain an agreement by each of the companies to be jointly and severally liable for any income tax of the consolidated group, and the details of the nominated company of the group. This can be done by using the Election to form a consolidated group - IR494 form on the page below.
Leaving the consolidated group
A member company must leave the consolidated group if they lose their eligibility status, or are no longer entitled to be a member. A member company may leave for other reasons, but must formally notify us.
Membership will usually end from the beginning of the income year we are notified in. If a member company is struck off the New Zealand Company Register, or liquidated, membership will end from the date of strike off or liquidation.
Consolidated groups and general elections - IR495
If a company needs to change the group’s structure or operation, they must fill out an IR495 form. This form can be used to make elections within a consolidated group. If your company is a member of a consolidated group, you can use this form to:
- elect to leave an existing consolidated group
- change the nominated company of a consolidated group
- elect to maintain trading stock concession
- apply to limit joint and several liability
- elect to join an existing consolidated group.