As your business grows, the business structure you use may no longer be appropriate and you may need to restructure.
For example, you may change your business entity type from a trust to a company, introduce additional entities, or reorganise your existing group. You may need to restructure for reasons such as asset protection, introduction of new business partners or changes in your business model.
Tax policies and procedures may not explicitly cover restructures. It's good practice to adopt tax policies for group restructures long before they occur. Seek external advice – with a second opinion if it ‘seems too good to be true’.
Where your own assessments or other advice suggests that the risk associated with your restructure is higher than your acceptable level, you may wish to seek early informal advice or a formal private ruling from us.
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Mergers and acquisitions
Takeovers and mergers of companies, including the sale and purchase of business assets, can give rise to complex tax issues, including implications for income tax and input tax credit entitlements under GST law.
You may need to seek advice from tax advisers to understand the tax issues. You may also wish to engage directly with us for advice before you lodge your tax return. We can help you reduce uncertainty by clarifying how the tax law applies to your particular circumstances.
Market valuations for restructures
The tax laws relating to many restructures involve the concept of market value. Market valuations should be determined close to the time of the restructure, with independent valuations where there are complex or contentious issues.
Tax governance principles should address high-risk market valuations, and provide for independent valuations where necessary. Where the level of risk exceeds your acceptable level, consider seeking informal or formal ATO advice.
As your business grows, the business structure you use may no longer be appropriate and you may need to restructure. Tax policies and procedures may not explicitly cover your new restructures. It's good practice to adopt tax policies for group restructures long before they occur.
Example: Major business restructure
Other businesses in your industry have engaged in complex restructures without making any changes to their commercial operations.
You're approached by a consultant offering a complex restructuring opportunity to help you save tax. Your finance team reviews the proposal and is impressed by the tax benefits but is concerned that it may be heavily tax-driven and seems ‘too good to be true’.
Your tax governance procedures for major restructures require that your professional tax advisers consider whether proposals comply with tax laws and confirm that their advice is consistent with the ATO’s view. You approach your tax advisers who advise that while it might be reasonably arguable that the restructure is compliant, it may also be contrary to the ATO's view and you should consider engaging early with the ATO for advice before undertaking the restructure.
End of example