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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
Grant WARDELL-JOHNSON

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This was presented at Annual Corporate Tax Intensive .

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