The current taxation environment fosters uncertainty. Appropriate tax planning is complicated by:
- all too regular changes in long standing practice by the ATO
- legislative uncertainty
- public and governmental focus on everyone paying ‘their fair share’
- international pressure to ensure all jurisdictions get what they perceive to be their slice of the pie.
In recent transactions, we have found accurate information that goes to value is being ascertained too late and causing pricing pressure or, following acquisition, key information that may not have been obtained to the detail necessary (e.g. extent of unrealised gains coupled with trust changes) is causing significant headaches for participants.
As such (and in an environment that should be encouraging transactions where tax is neutral to genuine commercial structures), tax not only needs to be thought through at the time of the transaction and on an on-going basis, but also needs to be addressed early. In addressing tax, the effect of the transaction and the impact of post transaction income flows and material expenses (e.g. asset sales, capital returns, dividends, losses, depreciation, and franking credits) need to be carefully examined, taking into account not only the purchasing entity, but all joint venture participants. Such analysis needs to consider the current state of the law, recent changes in ATO views, and known changes that may occur in the law.
Early engagement in tax matters is crucial. The protocols to allow this to happen on an on-going basis should be agreed upfront. In doing this, principals to a transaction can focus on the key commercial aspects that drive value, rather than allowing tax to take a prominence unwarranted in a stable economy.