Issue
Is there a de minimis period in respect of section 701-30 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. There is no de minimis period in respect of section 701-30 of ITAA 1997. If an entity is not a member of the consolidated group for the whole of the income year the entity is obliged to calculate its income tax position for the non-membership period even if that period is only one day.
Facts
Subsidiary company has been in existence for some years.
Subsidiary company becomes a subsidiary member of the consolidated group on 2 July 2004.
Both the head company and the subsidiary company are 30 June balancing companies.
Reasons for Decision
Subsection 701-30(2) of the ITAA 1997 states that it has effect for the entity core purposes if: 'a) the entity is a *subsidiary member of the group for some but not all of an income year; and (b) there are one or more periods in the income year (each of which is a non-membership period ) during which the entity is not a subsidiary member of any *consolidated group.' * denotes a term defined in section 995-1 of the ITAA 1997
Subsidiary company is not a member of the consolidated group on 1 July 2004. Thus, it has a non-membership period of one day, as it was not a subsidiary member of the group for the entire income year.
There is no provision in section 701-30 that allows for a de minimis period or creates an exception to the non-membership period as defined in paragraph 701-30(2)(b) of the ITAA 1997. Accordingly, the subsidiary company will be required to calculate its tax position in respect of the period of the year in which it was not a member of a consolidated group.