Tread Carefully - Budget 2020
With the recent release of the Federal Budget 2020, Kingsley Smith and Phil McCredden share with you some of the 'quirks' that you should know before spending your heard earned cash.
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There is a common understanding that the tax consolidation regime is for the “big end of town”.
Whilst tax consolidation does feature in the tax structuring of larger corporates, the tax consolidation regime is not only for the big end of town, but can be effectively used by Small to Medium Enterprise Groups (“SME”), the minimum requirement to form a tax consolidated group being a resident company with at least one wholly owned subsidiary company (or unit trust).
The tax consolidation regime treats the members of a consolidated group as a single entity for income tax purposes. This means that intra-group transactions are ignored for income tax purposes and the group lodges only one income tax return for each income year. Therefore, whilst tax consolidation is a choice, for many SME corporate groups it will be a practical necessity.
Some of the benefits that result from tax consolidating include the following:
Importantly, the tax consolidation regime can greatly assist SME’s in increasing their asset protection which is a very important commercial driver in deciding whether or not tax consolidate.
Take the following scenario which is not uncommon to an SME where tax consolidation can become very useful in assisting with asset protection:
Depending upon Mum and Dad’s other commercial requirements a possible solution could be the following in order to increase their asset protection:
The above will allow the moving of assets without any adverse tax impact as transactions within the tax consolidated group are ignored for income tax purposes (GST and duty will still need to be appropriately addressed as separate considerations).
The above should also achieve Mum and Dad’s goal of increasing their asset protection by splitting the Business from the PPE/Buildings.
If you would like to discuss the benefits of tax consolidation and how the regime may impact upon your SME clients please do not hesitate to contact the experienced & professional RWK Accountancy team!