Senator Webber asked the Minister for Revenue and Assistant Treasurer, upon notice, on 24 September 2002:

(1) What is the anticipated cost of the decision to allow a corporate group to transfer losses and be taxed as a single entity.

(2) Is there any truth to the claim by some mining executives that this new arrangement will allow them to unlock $11 billion in losses and enjoy a tax holiday for 20 years.

(3) Is it true that, under these new arrangements, businesses will be able to revalue all assets to market value without having to pay capital gains tax on the revaluations.

(4) Is it true that for depreciation purposes the new market value can be used as an expense over the estimated useful life of the asset.

Senator Coonan (Minister for Revenue and Assistant Treasurer) —The answer to the honourable senator's question is as follows:

(1) The forward estimates include a cost of $1,165 million over four years for the consolidation measure.

(2) No. The consolidation losses rules are designed to ensure that the use of a joining entity's losses by a consolidated group will generally approximate the rate at which they would have been used had the entity not joined the group. However the revenue cost given in answer to (1) anticipates that some losses may be used at a faster rate under the modified application of the current recoupment tests and the transitional rules.

(3) No. The cost of assets will be reset by aligning the cost of the assets held in subsidiary members with the head company's equity cost base in the subsidiary. This cost is then allocated to all the assets in accordance with the relative market values of the assets. In selling the membership interests to the head company, the vendor will generally have been subject to capital gains tax.

(4) No. The reset tax cost of the asset (not the market value) is used to determine the amount allowed as a depreciation deduction for tax purposes.