NATIONAL TAX LIAISON GROUP (NTLG) CONSOLIDATION SUB -COMMITTEE MEETING

							 NATIONAL TAX LIAISON GROUP (NTLG) CONSOLIDATION SUB-COMMITTEE MEETING MINUTES
           3 September 2003 - Rydges Hotel, Exhibition Street, Melbourne


  Attendees:                       Representing:

 Cathy                McBride      ABA             Commonwealth Bank of Australia
 Gordon               Thring       CPAA            Deloitte Touche Tohmatsu
 Mark                 Northeast    CPAA            Pitcher Partner
 Paul                 Drum         CPAA
 Frank                Drenth       CTA
 Mike                 Timmers      CTA
 Tony                 Stolarek     ICAA            Ernst & Young
 Johanna              Lowry        ICAA
 Grant                Cathro       LCA             Allens Arthur Robinson
 Annamaria            Carey        LCA             Thomson
 Matthew              Hayes        TIA             KPMG
 Peter                Murray       TIA             KPMG
 John                 Foster       TIA             PricewaterhouseCoopers
 Geoff                Lehmann      TIA             PricewaterhouseCoopers
 Ken                  Spence       TIA             Shaddick & Spence
 Brian                Lane                         Ernst & Young
 Paul                 Krakauer                     GE Capital
 Tim                  Neilson                      Greenwoods & Freehills           Delegate of
                                                                                    Richard Hendriks
 Debbie               Boyd                         Australian Taxation Office
 Scott                Burrows                      Australian Taxation Office
 Joe                  Camenzuli                    Australian Taxation Office
 Andy                 Cashman                      Australian Taxation Office       Minutes
 Peter                Coakley                      Australian Taxation Office
 Peter                Dunne                        Australian Taxation Office
 Murray               Hawkins                      Australian Taxation Office
 Greg                 Howes                        Australian Taxation Office
 Jim                  Killaly                      Australian Taxation Office       Chair
 Neil                 Olesen                       Australian Taxation Office
 Ray                  Samsonas                     Australian Taxation Office
 Geoff                Sheehan                      Australian Taxation Office
 Kevin                Stone                        Australian Taxation Office
 Martin               Jacobs                       Treasury
 Mark                 O'Connor                     Treasury
  Apologies:

 Ray                  Conwell      LCA             Deloitte Touche Tohmatsu
 Richard              Hendriks     LCA             Greenwoods & Freehills
 Lance                Cunningham   NIA             PKF
 Don                  Hammon                       AMP
 Gary                 Scanlan                      Australian Taxation Office


Introduction

Jim Killaly (ATO) chaired the meeting. Minutes from the previous meeting were accepted
without change.

ATO acknowledged that it was not possible to provide certainty on all outstanding requests
for advice on consolidation issues prior to the lodgment date for returns. ATO & Treasury
are committed to providing advice on a priority basis for issues that affect formation and
lodgment of returns.




Author: Neil Olesen                                       -1-                                          8/10/2003
 NATIONAL TAX LIAISON GROUP (NTLG) CONSOLIDATION SUB-COMMITTEE MEETING MINUTES
           3 September 2003 - Rydges Hotel, Exhibition Street, Melbourne

Providing certainty & moving forward

ATO acknowledged the requirement to provide more certainty regarding outstanding issues,
and the extension of the date for lodgment for early balancers to 24 October was aimed at
allowing this to happen. The ATO reiterated that it would still encourage an informal
notification of the intention to consolidate as this would provide information on entities likely
to consolidate and also enable these entities to be withdrawn from the ATO’s lodgment
demand processes.

ATO noted the concerns of members about “stick and spread” and other transitional choices
being irrevocable. This was identified as a major blocker for lodgment of returns by 24
October.

Issues Resolution

A list was tabled by external members of priority issues for consolidation that they
considered required legislative amendment. Some of the issues were dependent on
positions the ATO may take in interpreting the current law. A sub-list was compiled of the
“top 10” legislative concerns, together with 4 issues where it was necessary to first know the
ATO view (same business test, goodwill, 705-80 (step2) and the approach to dividends paid
from profit pools).

The issues register maintained by the sub-committee was also discussed. The version of
the register circulated at the meeting had been designed to consolidate the various issues
being considered at the working parties that were recorded on separate registers. The ATO
agreed to undertake a reconciliation of the registers, as it became evident that some issues
had not made the consolidated list.

The Linter Case

A paper on the ATO’s position about Linter and consolidation was distributed to members
before the meeting and discussed.

Members expressed the view that if the ATO were to be successful in its appeal on Linter,
the law should be amended to reflect the original intention of the Consolidation policy
statement that a group would include all 100%-owned members.

Working Parties

There was a discussion about progress towards resolving issues. It was noted that some
working parties appeared to be making faster progress that others, and some possible
reasons for this were explored.

The ATO explained that recent working party meetings had not proceeded because the
relevant officers were instead focussed on finalising papers for consideration by the ATO’s
tax counsel on 22/23 September 2003. The object of that meeting is to decide ATO
interpretations on some of the key issues that had been discussed at working parties.
Outcomes would be communicated as soon as practicable after that meeting.

      Single Entity Rule
      • The ATO advised that a paper would issue in the week ending 5 September, prior to
         the meeting of the SER working party in Sydney on 9 September.
      • The ATO will aim to issue a draft ruling on the Same Business Test by
         24 September 2003



Author: Neil Olesen                        -2-                                     8/10/2003
 NATIONAL TAX LIAISON GROUP (NTLG) CONSOLIDATION SUB-COMMITTEE MEETING MINUTES
           3 September 2003 - Rydges Hotel, Exhibition Street, Melbourne

      •     The ATO undertook to review the issues register to ensure that all issues are
            included.
      •     The ATO noted that there are additional papers being finalised and would arrange
            their release as soon as possible.

      Assets and Liabilities
      • The ATO will issue papers to working party members by 5 September, with a view to
         a phone conference the following week. (This occurred on 19 September).
      • The ATO is currently awaiting expert advice from their external advisers (an
         accounting firm) on Asset & Liability issues.
      • Members noted there are differing views (even within firms) on the treatment of DTL.

      Accrued Profits
      • ATO acknowledged the input of the externals’ paper on Accrued Profits. The Tax
         Counsel Network (TCN) is now considering the issues referred by the working party.
      • ATO will issue a number of papers to working party members by 5 September, and
         plans to conduct a phone conference in the near future.
      • As with the Assets & Liabilities Working Group phone hookup, members noted their
         concerns with this approach, as the previous meetings have been quite detailed and
         a phone hookup would be a difficult process.

      Goodwill
      • A meeting with the Valuers’ sub-group will be held on 4 September. Goodwill issues
         are to be considered by ATO tax counsel on 22/23 September
      • ATO to review issues register with a view to moving completed issues to the relevant
         part of the register, and ensuring all issues are recorded.

Tainted Share Capital

Members noted the table distributed with the minutes and that views were based on ATO’s
understanding of how the law would be drafted in this area.

Members noted that this issue could now be moved to the completed section of the register.

Consumables

Members expressed the view that for consumables and spare parts deducted on an
“incurred” basis, a further deduction should be available on consolidation for the reset value
(which is a different position to the ATO’s preliminary view). Other industry representatives
have indicated they support the ATO preliminary view on this issue, but take a different view
to the ATO on consumables deducted on a “usage” basis.

The ATO will take these differing views into account in finalising its position.




Author: Neil Olesen                          -3-                                   8/10/2003
 NATIONAL TAX LIAISON GROUP (NTLG) CONSOLIDATION SUB-COMMITTEE MEETING MINUTES
           3 September 2003 - Rydges Hotel, Exhibition Street, Melbourne

Part IVA

Members noted the release of the paper on how Part IVA will operate in relation to
Consolidation and commented that this was a significant development. However, members
considered some of the examples to be unrealistic, as in many instances a group will not
obtain increased deductions for depreciation in the first year of consolidation.

The ATO advised that the Part IVA paper will become part of the Consolidation Reference
Manual, and, like other parts of the CRM, it will be non-binding

Members noted that scenario 5 from an earlier draft of the paper had been dropped, and
wondered if anything should be considered from this. ATO agreed to look into this.

Foreign Tax Credits

The ATO advised members that we are still awaiting a decision (principally on creditability)
from US revenue authorities. We are also awaiting clearance from other jurisdictions
(Canada, Germany, and Japan) to publish their advice.

AMVA’s

The ATO advised that the tender for selection of the panel would close on 26 September.
The panel’s scope will extend beyond just AMVA’s. Guidelines are on the ATO web-site.
The ATO will discuss the roles of the panel with the AVO, and will then present a view on
whether the panel would or should be involved with individual reviews.

There are no cases yet for the AMVA Panel to consider.

Other business

Consolidation Reference Manual
A brief paper on the future of the publishing of the Consolidation Reference Manual was
presented to members.

This paper outlined that future publishing would be solely electronic, with users free to
download revised content from the ATO website. CD updates would also be provided to
users of the manual on a quarterly basis, at which times the index would also be updated.

Small / Medium Enterprises
Members expressed continued concerns regarding a lack of take-up and knowledge about
consolidation amongst the small business population. It was noted that there was some
reluctance by small businesses and their advisers to attend sessions on consolidation when
there was still uncertainty about how some of the rules will operate. ATO indicated that it
would continue to review its strategies for communicating the effects of consolidation with
SMEs and their advisers.

Next meeting

The next meeting of the NTLG Consolidation Sub-committee will be held in Melbourne on
Monday 29 September.




Author: Neil Olesen                       -4-                                   8/10/2003