Transactional tax issues in the era of coronavirus

Rod Grosvenor • May 27, 2020

The global economy has suffered a massive hit from the COVID-19 pandemic. The impact of the pandemic will open up opportunities for cashed-up funds and other buyers to take advantage of strategic and investment opportunities presented by the pandemic.

 

Businesses in a relatively strong financial position, despite the economic downturn may wish to consider capital management strategies, considering depressed asset values brought on by the COVID-19 crisis. It may also be an opportune time for businesses to restructure, rationalise by winding up dormant or unprofitable entities, and to undertake housekeeping in preparation for the divestment of non-core or non-performing operations.

 

There are many tax issues that may confront businesses when considering initiatives such as r estructures and refinancing.

With potentially depressed asset values, it may be opportune to consider restructures of operations to facilitate rationalisations or wind up of dormant or unprofitable entities, or the packaging of assets within entities to facilitate future divestments.

Outside of a tax consolidation or a GST group environment, any transfers of assets may trigger gains or losses for tax purposes or a mismatch of GST liabilities and credits. Where the parties to the transfer are not dealing with each other at arm's length, or no consideration is given for a transfer, market value consideration may be substituted for income tax purposes and it may be possible to support lower market valuations of assets in the current economic  climate.

 

The stamp duty consequences of any transfers of assets should also be considered. 

Reconstruction relief may apply to an otherwise dutiable transfer. The extent to which any prima facie stamp duty is concessionally treated or waived does vary between the states and territories. 

It is important to note that the relief does not apply automatically - it must be applied for and approved by the relevant revenue authority.

 

In the era of COVID-19, many businesses will be confronted with issues such as the need to refinance, the forgiveness of loans, or the wind up of non-profitable or underperforming operations. Appropriate structuring of these transactions can assist in mitigating any adverse tax consequences and/or facilitating optimal tax outcomes. 

It is also important to not lose sight of the opportunities that present themselves in these uncertain times.

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ATO scrutiny on car parking fringe benefits

By Rod Grosvenor • March 14, 2020
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Tax deductibility of donations to bushfire relief

By Rod Grosvenor • February 8, 2020
Australians can claim a tax deduction for a donation of cash of $2 or more made to an organisation that is endorsed by the ATO as a Deductible Gift Recipient (DGR) . There are many different types of DGRs including Public Benevolent Institutions like the Australian Red Cross Society, or organisations established to prevent or relieve the suffering of animals like Wildlife Victoria Inc.

Denying the CGT main residence exemption to “Aussie expats” –– adapting to the new rules, and why “tax residency” is now even more important than ever.

By Rod Grosvenor • February 1, 2020
Under the new foreign resident main residence rules, most non-residents have until 30 June 2020 to sign a contract to sell their former Australian main residence, with the benefit of the MRE (either on a full or partial basis). For any sale contracts entered into after that date, the majority of Australian expats (i.e. non-residents) will not be entitled to apply the MRE at all for any capital gain made on their former Australian main residence.

CGT changes for foreign residents – CGT main residence exemption

By Rod Grosvenor • January 20, 2020
Treasury Laws have now been passed  which removes the entitlement to the CGT main residence exemption for foreign resident individuals . Previously , foreign resident individuals were entitled to access the CGT main residence exemption in the same way as Australian resident individuals. Broadly, an individual taxpayer's capital gain or loss in relation to their dwelling (or ownership interest in it) is disregarded if the dwelling was the taxpayer's main residence throughout the ownership period. Subject to transitional rules, these amendments deny access to the CGT main residence exemption for foreign residents, other than where certain 'life events' occur during the period that a person is a foreign resident where that period is six years or less. Transitional rules provide that the amendments do not apply in relation to a capital gain or loss from a CGT event that happens on or before 30 June 2020. If you believe that these amendment may impact you or you would like further clarification please do not hesitate to contact Rod or your consultant at Grosvenor Business Advisers.

Tax relief and assistance with bushfire recovery

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Instant Asset Write-off- extension and increase

By Steven Dainty • December 14, 2019
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ATO tax debt may affect your credit rating

By Rod Grosvenor • December 14, 2019
ATO debts may affect your credit rating Businesses with tax debts need to be aware that the ATO will now be able to disclose the details of their tax debts to credit ratings agencies, which could potentially affect the ability of the business to obtain finance or refinance existing debt. Generally, only businesses with an ABN and debts over $100,000 and that are not "effectively engaged" with the ATO will be affected. The ATO is planning a phased implementation which will consist of undertaking education efforts before it targets companies, followed by partnerships, trusts and sole traders. The aim of the laws, according to the government, is to encourage more informed decision-making within the business community by making large overdue tax debts more visible, and to reduce the unfair advantage obtained by businesses that do not pay their tax on time. Tip: Are you unsure if you have a tax debt, or perhaps you need help with working out a payment plan with the ATO for your existing debt? We can help you with all of this and more.