Tax requirements for consolidated groups
A consolidated group files one company income tax return that includes the income of all the companies in the group. This return is filed under an IRD number that is separate from the individual companies’ numbers. One member of the group must be the nominated company to:
- file income tax returns
- pay income tax of the group on behalf of all members.
The member companies only need to file separate returns when a company enters or leaves the group during the year.
The group will usually only receive one income tax assessment. There may be separate assessments when there is a consolidation during the year.
Each member is responsible for their share of any tax liability while a member of the group.
What is the consolidated groups assessable income?
The assessable income for the group is the sum of the member companies’ assessable income. Activities that affect the assessable amount are:
- intra-group transactions
- the determining thresholds on a group level
- the treatment of the consolidated group as a single company.
Loss carry-forward and grouping
Common loss carry-forward and grouping activities apply to a consolidated group as if it were one company. The loss brought forward balance in the group’s first return is nil.
Losses before consolidation remain with the individual members. In some situations, a members’ losses before consolidation may be offset against group assessable income.
Members pre-consolidation losses that are not offset against group income can be one of the following:
- Carried forward for offset against further income when the member leaves the group.
- Offset to a company 66% commonly owned, including another consolidated group.
Losses are offset on a first in, first out basis. They are distributed on a pro-rata basis if they arise in the same income year.
The group must maintain its own separate imputation credit account (ICA).
The opening balance of a newly formed group ICA is nil. An existing group’s balance is the closing balance of the previous imputation year.
ICA’s of each member group are maintained separately from the group ICA.
Individual ICAs will record the balance to the date of consolidation.