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  • Corporate restructures involving acquisitions or disposals

    Corporate restructures involving acquisitions and disposals are a priority focus for us. These transactions could result in a range of factors you need to consider for taxation purposes.

    Acquisitions

    Issue

    Key focus areas

    Consolidation

    • Structuring acquisitions, or restructuring where the economic ownership remains unchanged – including inserting a new head company
    • Ensuring your allocable cost amount (ACA) calculations are accurate
    • Correctly identifying the assets acquired by the group that are subject to the tax cost setting rules
    • Applying the appropriate market value to the reset cost of base assets in the ACA allocation process
    • Ensuring the eligibility of deductions claimed under the rights to future income and residual tax cost setting rules
    • Applying the multiple entry consolidated (MEC) group rules correctly
     

    Capital gains and losses

    • Calculating the cost base of the asset joining the group
     

    Losses

    • Correctly applying the following when transferring losses from a joining entity to a head company of a consolidated group
      • modified continuity of ownership test
      • same business test rules
      • available fraction.
       
    • Ensuring the available fractions for the entire group are correctly calculated
    • Correctly applying the continuity of ownership and same business tests when deducting tax losses or applying net capital losses
     

    International tax

    • Whether increased value has been allocated to the Australian entity for thin capitalisation purposes
    • Post-acquisition refinancing, particularly where there is evidence of debt loading or interest rates changes
    • Innovative or uncommercial risk transfer arrangements
     

    Goods and services tax (GST)

    • Claims for GST credits on related acquisitions that were not made solely for a creditable purpose, where the restructure involves making (or an intention to make) input taxed financial supplies
    • Changes to business structures, systems or accounting processes and the impact on correct reporting of GST obligations
     

    Other

    • Deductibility of your purchase costs
    • Financing arrangements involving hybrid or innovative instruments
     
    Disposals

    Issue

    Key focus areas

    Capital gains and losses

    • Correctly classifying the proceeds of an asset sale as revenue or capital
    • Steps within corporate restructures that may result in reduction, deferral or elimination of a capital gain
    • Rollovers, exemptions or concessions used to reduce or defer any capital gains
    • Use of convertible notes
    • Material differences between the economic and tax outcomes
    • Valuations used to calculate a capital gain or capital loss
    • Exiting an entity from a tax consolidated group or deconsolidating a tax consolidated group
    • Disposal of taxable Australian property by non-resident organisations, including
      • real estate
      • mining rights
      • interests in an Australian entity that owns real estate and mining rights in Australia
       
     

    Losses

    • Application of the following tests when deducting tax losses or applying net capital losses
      • continuity of ownership test
      • same business test.
       
     

    Goods and services tax (GST)

    • Claims for GST credits on related acquisitions that were not made solely for a creditable purpose, where the restructure involves making (or an intention to make) input taxed financial supplies
    • Changes to business structures, systems or accounting processes and the impact on correct reporting of GST obligations
     
    Last modified: 31 Mar 2016QC 48607