An evaluation of control premium and its tax implications
Source: The Tax Specialist Journal Article
Published Date: 1 Oct 2012
A correct understanding and assessment of control premium has direct implications for the outcome of a principal asset test required to determine whether or not a foreign resident is liable to Australian capital gains tax arising from a capital gain on a sale of shares in a company and the assessment of enterprise value and goodwill value for tax purposes under the top-down residual method. Unfortunately, such understanding has proved elusive in practice.
This article discusses the important distinction between ex-ante control premium and ex-post observed takeover premium and the incorrect practice of mechanistically assessing the ex-ante control premium for an entity which has not been subjected to a takeover bid as at the valuation date based on average observed ex-post takeover premium. In fact, achieving the correct understanding and assessment of control premium for a given entity requires significantly complex and lateral valuation thinking.
Sorry, this is subscriber only content.
To gain access to this material and much more - Subscribe Now.
(Note: Members can access Taxation in Australia journal articles without a Tax Knowledge Exchange subscription - please log in to access).
Already a Subscriber? Login now
Already a Subscriber? Login now
Details
- Published By: Hung Chu
- Published On:1 Oct 2012
The material is copyright. Apart any fair dealing for the purpose of private study, research criticism or review, as permitted under the copyright Act, no part may be reproduced by any process without written permission from The Tax Institute.
Unless expressly stated, opinions are not that of The Tax Institute, which accepts no responsibility for the accuracy of any of the information contained within it.
The Tax Institute
(ABN 45 008 392 372 (PRV14016))
("TTI")
The Tax Institute is a Recognised Tax Agent Association (RTAA) under the Tax Agent Services Regulations 2009.
Copyright Statement
All materials provided on this site are protected by copyright and are owned by or licensed to TTI.
Except as expressly permitted by TTI or the copyright owner, any person or company who uses this site must not use, reproduce, redistribute, retransmit, publish or otherwise transfer, or commercially exploit, the materials or any information, software or other content, in whole or in part, which is available through this site.
Tags
Share this page