The Federal Court recently had to consider the consolidation rules in relation to an MEC group. In this case, the MEC group had filed the relevant form with the Australian Taxation Office to choose to form an MEC group. However through an administrative error, the date of joining was not inserted on the form lodged with the Commissioner even though it was intended that the two companies joined the group when they were incorporated. The Commissioner therefore argued that the two companies were not part of the MEC group because the choice required by the tax legislation had not been made by the taxpayer.
The court decided however that:
- it was clear from the extraneous evidence that the taxpayer chose the two companies to become part of the MEC group on the date of incorporation and that this was all that was required to establish that the required choice by the relevant provision of the tax law had occurred notwithstanding the mistake in failing to fill the date in on the form
- the choice in writing requirements of the tax law did not need the time for joining to be part of the choice but rather the choice itself implies and establishes the time of joining
- if the date had been required to be inserted on the form contrary to the above view that it was not required, then the court would rectify the form to insert the date of joining as the date of incorporation of the two companies.