The tax requirements for companies that have formed a consolidated group.
Income tax
A consolidated group files 1 company income tax return that includes the total assessable income of all the companies in the group. This return is filed under a separate IRD number from the individual companies’ numbers. One group member must be the nominated company to:
- file income tax returns
- pay income tax of the group on behalf of all members.
The group will usually only receive 1 income tax assessment. There may be separate assessments for member companies and the consolidated group when a company enters or leaves the group or there's a consolidation during the year.
Each member is jointly and severally liable for the income tax assessed for the group, unless the group limits this to 1 or more member companies. We must be satisfied that the company or companies are able to meet the tax liability of the consolidated group.
The joint and several liability also includes the taxes listed in ‘Other taxes, accounts and payments’ below.
Provisional tax
Consolidated groups are treated as 1 company for provisional tax.
A company that used the ratio method to calculate provisional tax must stop using this method when they join a consolidated group. A consolidated group must meet all the criteria before they can use the ratio method. For this reason, a newly formed consolidated group will not be able to use the ratio method.
Where a company stops being a member of a consolidated group, it (or another consolidated group that it joins) must estimate its provisional tax. The consolidated group may also choose to estimate its provisional tax down to account for the departing member.
Balance date changes on forming a consolidated group
To be eligible to be part of a consolidated group, a company must have the same balance date as other group members. If the group has several balance dates at the time of forming, the companies forming the group must decide which date to use.
If 1 or more companies change their balance date before joining a group, this may create a transitional year along with provisional tax obligations on the company up until the time the group is formed.
Goods and services tax
A GST registered company that joins a consolidated group must match its GST filing frequency to the group’s balance date.
Other taxes, accounts or payments
Consolidated groups are not able to register for the following taxes, accounts or payments. The individual companies in the group are responsible for registering and administering these.
- Employer registration account
- Non-resident withholding tax
- Fringe benefit tax
- Resident withholding tax
- Approved issuer levy
Loss carry-forward and grouping
A consolidated group must meet the shareholder continuity or business continuity requirements to carry forward a loss from year to year. If a company that makes a loss (loss company) leaves the consolidated group, the loss incurred up until the date of exit stays in the group.
The loss brought forward balance in a consolidated group’s first return is nil.
Pre-consolidation losses
A loss that a company makes before it becomes a member of a group is known as a pre-consolidation loss. The general treatment for pre-consolidation losses is that they can be used by the consolidated group:
- First, applied against the consolidated group income if the group existed from the year the loss was made by the loss company, through to the income year of the loss offset.
- Second, applied against the loss company’s own income, or the income of another eligible consolidated group or company.
- Third, carried forward to future periods of that company.
Losses are offset on a first in, first out basis. They are used proportionately if they are made in the same income year.
If the company claiming the loss (loss company) does not have 66% common ownership interests with 1 or more companies in the same consolidated group, the loss is restricted to the total of:
- the amounts that the loss company that made the pre-consolidation loss would be allowed to offset against its own income if it was not part of the consolidated group
- the amount allowed to be offset against income of those other members that formed a 66% group with the loss company, for the period from the start of the income year when the loss arose, to the end of the income year when the loss is to be used.
Any pre-consolidation losses that cannot be offset against the consolidated group's income may be:
- carried forward by the member company, or
- offset against the assessable income of another 66% commonly owned company (including in other consolidated groups).
The loss company must continue to meet the ordinary loss carry forward rules (including the 49% continuity of shareholding), or the business continuity test.
Imputation credit accounts
A consolidated group must keep its own separate imputation credit account (ICA) and file an imputation return for the group, as part of its non-individual income tax return.
The opening balance of a newly formed consolidated group ICA is nil. An existing group’s balance is the closing balance of the previous imputation year.
Companies in a consolidated group must file their own annual imputation return to keep a record of the current balance and any changes. However, from the 2020-21 tax year, if the company always has a nil ICA balance during the relevant tax year, it is not required to file an annual ICA return.
From 1 April 2021, the rules on the allocation of imputation credits when a member leaves a consolidated imputation group changed.
- A consolidated imputation group may choose to receive a debit to its ICA, equivalent to a tax payment from a departing member, that has not been used to pay tax due.
- If the representative group member decides to receive an imputation debit, the departing member may receive an equivalent imputation credit to its ICA.
- The departing member may be a company or a consolidated imputation group.
- The debits and credits to the ICAs will happen on the same day as the original credit from to the corresponding tax payment.