Consensus (INT1052_06-05_COMPdec21_01-22)

The head entity and each subsidiary in a tax-consolidated group is required by AASB 112 to account for the current and future tax consequences of its assets and liabilities and transactions and other events of the current period.

The consolidated current and deferred tax amounts for a tax-consolidated group shall be allocated among the entities in the group when they issue separate financial statements. This Interpretation does not require a single allocation method. However, the method adopted shall be systematic, rational and consistent with the broad principles established in AASB 112.

The following methods are examples of acceptable allocation methods:

(a) a “stand-alone taxpayer” approach for each entity, as if it continued to be a taxable entity in its own right;

(b) a “separate taxpayer within group” approach for each entity, on the basis that the entity is subject to tax as part of the tax-consolidated group. This method requires adjustments for transactions and events occurring within the tax-consolidated group that do not give rise to a tax consequence for the group or that have a different tax consequence at the level of the group; and

(c) subject to paragraph 10, a “group allocation” approach, under which the current and deferred tax amounts for the tax-consolidated group are allocated among each entity in the group.

The following group allocation methods, for example, are not acceptable:

(a) a method that allocates only current tax liabilities to an entity in the group that has taxable temporary differences;

(b) a method that allocates deferred taxes to an entity in the group using a method that is fundamentally different from the temporary difference approach required by AASB 112; and

(c) a method that allocates no current or deferred tax expense to an entity in the group that has taxable income because the tax-consolidated group has no current or deferred tax expense.

Specific tax consolidation adjustments shall be accounted for by a subsidiary in a tax-consolidated group as follows:

(a) current tax liabilities (or assets) recognised for the period by the subsidiary shall be accounted for as immediately assumed by the head entity;

(b) deferred tax assets arising from unused tax losses and unused relevant tax credits recognised for the period by the subsidiary shall be accounted for as immediately assumed by the head entity;

(c) assets and liabilities (if any) arising for the subsidiary under a tax funding arrangement shall be recognised as amounts receivable from or payable to other entities in the group; and

(d) any difference between the net tax amount derecognised under paragraphs (a) and (b) and the net amount recognised under paragraph (c) shall be recognised as a contribution by (or distribution to) equity participants between the subsidiary and the head entity.

In addition to the tax effects of its own transactions, events and balances, the head entity in a tax-consolidated group shall recognise:

(a) the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused relevant tax credits assumed from the subsidiaries in the group;

(b) assets and liabilities (if any) arising for the head entity under a tax funding arrangement – as amounts receivable from or payable to other entities in the group; and

(c) any difference between the net tax amount recognised under paragraph (a) and the net amount recognised under paragraph (b) – as a contribution by (or distribution to) equity participants between the head entity and its subsidiaries.

This Interpretation does not prescribe which account or accounts shall be adjusted for contributions by (or distributions to) equity participants arising under paragraph 11(d) or 12(c).

Where a subsidiary in the tax-consolidated group is not a direct subsidiary of the head entity, any contribution by (or distribution to) equity participants shall be accounted for as contributions or distributions through the interposed parents.

Where the head entity is in default of its payment obligations under the tax consolidation system, or such default is probable, a subsidiary in the tax-consolidated group shall recognise a liability (if any) arising under the joint and several liability requirements of the tax consolidation system or their tax sharing agreement (if any).

The following information shall be disclosed separately by a head entity and by a subsidiary in a tax-consolidated group:

(a) the relevance of the tax consolidation system to the entity, including the part of the reporting period for which it applies to the entity where it is not applicable for the whole of the reporting period, and the name of the head entity;

(b) the method adopted for measuring the current and deferred tax amounts;

(c) information about the nature of any tax funding arrangement and any tax sharing agreement, including significant terms and conditions that may affect the amount, timing and uncertainty of future cash flows; and

(d) the net amount recognised for the period as tax-consolidation contributions by (or distributions to) equity participants, its major components and the accounts affected.