On 7 February 2008, the Institute lodged a substantial submission with the Department of Treasury in connection with the former Government announcements of 12 and 16 October 2007 (refer to Editions 39/2007 and 40/2007 of the Tax Bulletin) and the current Government announcement of 11 January (refer to Edition 1/2008 of the Tax Bulletin) in relation to modifications to the tax consolidation regime to prevent "inappropriate uplifts" in the tax costs of a joining entity's assets following certain rollovers.  
 
Members will recall that the Institute welcomed the current Government announcement of 11 January 2008 which followed our extensive discussions with the Assistant Treasurer's Office. Following this announcement, we have been engaged in confidential discussion with Treasury to ensure that this later announcement is appropriately implemented. The submission represents our latest position in this latter consultation process.  
 
Submission on announcements of 12 and 16 October 2007 and 7 February 2008 
 
The key points made by the Institute in its submission are as follows:

• We endorse the Assistant Treasurer's comment in his media release that "It is necessary to ensure that the changes protect public revenue while not having the unintended consequence of hindering the operation of scrip for scrip transactions." We therefore believe that the focus should be on restoring legitimate scrip takeovers by widely held entities as a mechanism for growth of Australian companies. Any other peripheral proposals to adjust tax consolidation or other rules and policies should be deferred. 
   
  
• The ATO could use existing legislative integrity measures in relation to contrived rollovers, and the ATO should be urged to apply Part IVA to rollovers under Subdivision 124-M that cause inappropriate uplifts.  
   
  
• Alternatively, and in the interest of providing more certainty to Australian capital markets by mid February as desired by the Assistant Treasurer, we recommend that new integrity rules be inserted in Part 3-90 to deal with tax cost setting outcomes in respect of certain Subdivision 124-M scrip rollovers.  
   
  
• Rollovers of pre-CGT interests under Subdivisions 122-A, 122-B, 124-G and 124-H should be dealt with by way of separate integrity rules such as in a modified s. 705-57, in a process separate to that for Subdivision 124-M scrip rollovers.  
   
  
• Any reforms to the application of s. 45B should be undertaken as a separate tax reform process, and should not delay the prompt resolution of the proposed scrip rollover measures.  
   
  
• There was insufficient information in the original announcements to justify making the proposal being retrospective to 12 (or even 16) October 2007. The proposed measures should instead be effective from the date of the more detailed announcement that is expected to follow this consultation process.