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Making the most of limited resources in tax due diligence - what to focus on in the purchase of a corporate entity paper

Published on 26 Oct 06 by NEW SOUTH WALES DIVISION, THE TAX INSTITUTE

Normally due diligence is carried out where a consolidated group is acquiring another consolidated group or a stand alone entity or group of entities - are you looking at the most significant matters or are the entities being acquired bringing unrecognised problems into the group? This paper covers topics including:

  • joint and several liability exposure arising from membership of previous consolidated groups - lack of visibility
  • risks from open assessment periods beyond four years
  • latent tax liabilities which could be triggered on acquisition, for example
    • CGT events L3, L5 and J1
    • crystalisation of unrealised gains
  • limitations on availability and utilisation of tax attributes
    • changes in relative market values of group companies
    • impact of gearing on available fraction calculations
    • capital injection and other adjustments
  • structural tax issues for the carry-forward entity arising from historical positions.

Author profile:

Author Photo - Grant Wardell-Johnson CTA
Grant Wardell-Johnson CTA
Grant, CTA, is the Head of the Australian Tax Centre at KPMG. Grant has a background in providing tax advice relating to international and domestic tax structuring, international cross-border acquisitions and initial public offerings. Grant has been the lead Tax Partner on many high-profile projects in the Australian and international markets, including the Wesfarmers acquisition of Coles Limited, Macquarie Group consortia acquisitions of Boart Longyear Limited and Dyno Nobel Limited and their subsequent listing on the Australian Securities Exchange. Grant now leads the consultation on new law and response to base erosion and profit shifting (BEPS) and the OECD Action Plan. He is a member of the Treasury BEPS Advisory Group. Current at 17 March 2016 Click here to expand/collapse more articles by Grant WARDELL-JOHNSON.
 

This was presented at Annual Corporate Tax Intensive.

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