Income tax 2019

The earnout workout

Source: Taxation In Australia Journal Article

Published Date: 1 Feb 2019


The income tax treatment of arrangements involving deferred consideration (earnouts) has been embarrassingly complex for tax practitioners and administrators alike. This continues to be the case, particularly for earnout arrangements that are not covered by the 2015 amendments to the capital gains tax rules. A recently released discussion paper from the ATO raises a number of consultation questions aimed at determining what future guidance is needed for those arrangements. The article analyses the current tax issues by way of a simple example and suggests that, first, greater clarity is needed to determine when earnout amounts are assessable or deductible. Second, the article suggests that the taxation of financial arrangement rules could be used to provide a more comprehensive solution to the treatment of earnouts.

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Income tax 2019

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