Businesses that operate through multiple companies under a traditional tax regime would undoubtedly endure highly complicated tax returns and the ongoing administrative burden of moving profits and losses around. Fortunately, Tax Consolidation is available to head companies that meet eligibility requirements and it can greatly simplify the process.
Australia’s Tax Consolidation regime has been in effect since 1 July 2002 under the New Business Tax System (Consolidation) Bill 2002. Tax consolidation is a system that allows wholly or majority owned businesses (for example, trusts and partnerships) to be treated as a single entity for tax purposes. This means that a company that chooses to consolidate would only be required to lodge a single tax return and pay a single set of PAYG instalments for its subsidiaries. This is an effective way to operate as it can significantly reduce compliance costs for your company.
Other benefits include:
- For tax purposes, intra-group transactions are ignored
- Losses are pooled
- Asset protection
- Reduction of tax related impediments to group restructuring
Companies undergoing consolidation must have their assets valued for tax purposes. This allows them to identify the new tax costs for the assets of a connected subsidiary as well as the cost base of membership interests of exiting entities; this is known as the cost setting process. For tax consolidation, the determined value of an asset will be based on its ‘market value’ and its proportion to all other assets. This can often lead to a significant uplift in the carrying value of these assets which can then be written off for Taxation purposes.
At Hymans, we are experienced in providing plant and equipment valuations for tax consolidation. Our valuers have extensive experience in a range of industry sectors and have undertaken projects varying in size from 1 site to 600 sites. We have one of the largest teams of expert plant and equipment valuers in Australia, covering major cities right through to remote locations.
To organise a professional valuation of your assets, contact our friendly team here today.
