Interest deductions for consolidated groups

2010 legislative amendment disallows deductions for interest incurred on money borrowed when both companies are members of the same consolidated group of companies.

Section FM 12(2) of the Income Tax Act 2007 has been amended retrospectively to disallow a deduction for interest incurred on money borrowed from another company, when both companies are members of the same consolidated group of companies.

As originally enacted in the 2007 Act, section FM 12(2) allowed a company a deduction for interest incurred on money borrowed from another company within the consolidated group. This was an unintended legislative change, when compared with section HB 2(1)(d) of the 2004 Act, which prevented a company within a consolidated group from being allowed a deduction for interest incurred on money borrowed from another company within the same consolidated group.

Section FM 12 has been amended to ensure that it restores the effect of section HB 2(1)(d) of the 2004 Act.