Of immediate interest is goodwill associated with the conduct of that business activity at a specific location. Further, where the conduct of that activity at a particular location forms part of the taxpayer’s business of carrying out that activity at a variety of locations (e.g. management or operation of certain property assets such as pubs, hotels, shopping centres and aged care facilities).
Often, in the calculation of the tax balance sheet upon formation of a tax consolidated group (or entities of substance joining a tax consolidated group), goodwill is allocated amongst the various members of that group based on some combination of the nature of their respective activities and/or profitability. Little, if any, regard is paid to the way in which that goodwill was originally acquired and dealt with in the ordinary course of business.
Also, for accounting purposes, goodwill is often recognised at the consolidated level subject to periodic impairment testing as if it is a single asset.
This 'mismatch' of treatments of goodwill can often lead to surprising tax outcomes.
For example, in calculating the capital gain or loss realised on the disposal of say, an aged care facility, the treatment of goodwill as a 'holistic' asset could deny the relevant taxpayer an ability to allocate a cost base amount to the goodwill component of the overall capital proceeds received upon that disposal.
To achieve such a cost base amount in those circumstances, do your in-house tax risk management policies require you to clarify the ability to recognise goodwill as a 'site' asset for tax purposes with a ruling from the Commissioner?