When restructuring, the detail can make make a significant difference to your tax position
Q. We are completing a restructure of our company. This will involve transferring it to a related entity. There are various classes of shares issued in our company. We have agreed on a transfer price but have not worried about apportioning the total value across the different share classes. Is this important? Some of the shares classes don’t have voting or capital rights.
A. Yes, it may be important to apportion value across the share classes. We don’t have enough information from your questions to understand all of the surrounding facts, however if the transfer triggers a capital gains tax event, all of the shareholders will need to account for the capital gain in respect of the individual shares they held. To do this they will need to know the value of the consideration received on their shares.
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Key issues to consider when selling your business
Q. We are looking to position our business for a sale in the new year. We are sure that we want to sell the business but are less certain about the best way to achieve this. Do you have any ideas on what we should be focussing on?
A. There are two key pieces in the sale of a business. One is the structuring of the transaction the other is the positioning of the business to the market. Both pieces are important and can significantly impact your result.
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Avoid these tax minimisation mistakes in the end of year flurry
Q. We’re starting to think about the end of financial year and some tax planning to maximise our tax position. Are there any obvious things we should be looking at and are there any traps we need to watch out for? My partner is keen to get every possible tax deduction but I’m not sure how far we should go.
A. The end of financial year always causes a flurry of activity. The earlier you can plan this out the better the chance that you will not get caught making poor decisions. The three biggest mistakes are; spending simply for sake of the tax deduction, taking deductions that will cause you a cash flow problem and taking a lower value tax deduction this year only to pay the tax at a higher rate next year.
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CGT small business concessions rules are complex – Don’t go it alone!
Q. We are looking to sell our business and will be relying on the CGT small business concessions to reduce our tax exposure. The shares are held between two families and we have a number of different shares classes on issue. Is there anything we need to be looking at in advance of the sale?
A. Eligibility for the CGT small business concessions is tested at the time of the CGT event. This is when you sign the contract for sale of the business. If you are relying on the small business concessions to manage your capital gain then it makes good sense to have your position reviewed in advance of any sale. You should not attempt to do this yourself. You need to have your accountant or tax adviser complete this for you. The CGT rules are complex and the review should be completed by someone who fully understands all of the rules and how they will apply to your situation. They will need to have all of the facts available to test your position. Often people get caught out in this area because of small details that are over looked.
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Building an optimal structure
Q. We are looking at our current business structure. We operate through a number of companies. In the main they have common shareholding. There is an increasing number of transactions that occur between the companies. Is there an ideal structure that we should have?
A. There is no single structure that will be right for all circumstances. This is something that you should get some professional advice on. When you look at business structures there are a range of issues that should be considered. These include risk protection, tax efficiency, succession and operating efficiency. The ideal structure delivers in all of these areas.
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