With changes in company tax provisions in July, groups of companies now have to consolidate if they want to transfer losses from one company in a group to another, or transfer assets from one entity in the group to another without paying capital gains tax.

Consolidation has been available since July 2001 and applies to wholly owned corporate groups. A parent company and its wholly-owned subsidiary (which could be a partnership or fixed trust rather than a company) can consolidate. But there must be a "head company" - if an individual or a trust owns the whole of the shares in two companies, rather than first owning a holding company, those two companies could not consolidate. Discretionary trusts cannot be part of a consolidated group. If you require advice on structuring a corporate group contact your solicitor.

Reproduced from In Touch With The Law, published by the Law Society of NSW