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Capital Gains Tax On Sale Of Business Re Liabilities Assumed By Purchaser
What is the capital proceeds where liabilities are assumed on sale of a business?
The capital gains that is subject to tax to the vendor when the purchaser takes over liabilities is the grossed up amount including the liabilities as explained below.
Buying A Business Do Your Homework!
When Buying A Business Do Your Homework!
It may seem obvious but it is easy to lose sight of the following considerations when the emotion of engaging in a business venture comes into play.
. The sale contract should allow an adequate period of time for you to do your homework to ascertain that all aspects of the business are in order.
. When buying a business you are buying an asset from which you expect a return on your investment. The higher the risk the larger would be the expected return and vice versa.
. Engage the services of the appropriate professionals. An accountant to analyse the financial records to, among other matters, ensure the business is capable of achieving your required return on investment and that the asking price is fair and equitable. The accountant will also advise you of the most appropriate structure to use to purchase your business. A lawyer will examine all contracts, agreements, licences and permits to ensure of their adequacy & legality.
. If sales of the business are generated from a few key customers, the agreements with those customers need to be examined to see how easy it would be for those customers to end the relationship.
. Likewise as above, if the business relies on a few suppliers, the arrangements with those suppliers need also to be examined.
. It is often said that the employees are the business. If the business relies on a few key employees and or their intricate knowledge, then you must ensure that they are going to stay on or at least pass on their specialist knowledge to the buyer.
. You must ensure that the rent or lease in place ensures an adequate period of tenancy and also that it is legal to operate from the premises as it is in its present form.
. If intellectual property exists you must ensure that it is properly identified, the seller is the legal owner and that it can be easily transferred to the buyer.
. Ensure that all the required licences and permits are in place with the appropriate levels of government and authorities.
Capital Gains Tax Main Residence Exemption and Marriage Breakdown
Capital Gains On Assets Including Main Residence Due To Marriage Breakdown.
Tax Loss Claim Against Prior Year Profits
Applying Current Year Losses Against Prior Year Tax Liabilities
Legislation not yet passed, but imminent, is intended to allow companies to utilise a current year tax loss against a tax liability paid in a previous income year.
The legislation is intended to apply from 1st July 2012.
There are a number of conditions that will need to be met before the tax offset is able to be used. In summary these are:
. The taxpayer is a corporate entity or an entity that is taxed like a company.
. The entity has a tax loss from the current year or carried forward from the preceding year.
. The entity has an unutilised tax liability for the preceding income year or the year before that.
. The entity has lodged all its tax returns for the current year and each of the previous five income years.
. The entity has a positive franking account balance at the end of the current year and,
. The entity does not fail the specific loss carry-back integrity rule. The entity must meet either the continuity of ownership or same business test.
In most cases the legislation will apply when an entity carries back a tax loss that is made in the current income year. From 2014 income year onwards, losses claimed can be claimed against tax liabilities of either of the two previous income years. However, in the 2013 income year it will only be possible to claim current year losses against the company's tax liability for the 2012 income year.
There are some losses that are not eligible under the loss carry-back rules. In summary these are:
. Capital losses
. Losses that are created when a company has excess franking credits for an income year.
. In some situations losses transferred between companies in the same foreign banking group.
. In some situations where losses are transferred to the head company of a consolidated group by an entity joining the group.
Capital Gains Tax and the 12 Month Rule
Capital Gains Tax and the 12 Month Rule
Capital Gains Tax (CGT).To qualify for the CGT discount, a CGT asset must have been acquired by the taxpayer at least 12 months before the CGT event.
Certain CGT events, such as those that alter an asset to such an extent that they are deemed to create a new asset (e.g. major renovations), cannot qualify for the CGT discount because the asset is now deemed to not have been acquired at least 12 months before the CGT event.
In some cases, a taxpayer that acquires an asset within 12 months of the CGT event will be eligible for the CGT discount for any capital gain that arises. This will occur where certain assets are acquired under the same asset or replacement asset rollover provisions or under the rules applying to deceased persons. In these cases, the taxpayer will be treated for CGT purposes as having acquired the asset for at least 12 months if the collective period of ownership is at least 12 months.
Assets owned by a taxpayer before becoming an Australian resident are treated as having been acquired at the date they became an Australian resident, so the 12 month rule will commence from the date from the date of residency. This rule does not apply to assets that are taxable Australian property before the person becomes a resident.
The 12 month rule is subject to two other provisions that can negate the CGT discount:
Capital Gains Tax Companies
Capital Tax Companies
The top 5 issues holding back your business
Overcoming the biggest problems in business often comes down to the simple things. Here are a few simple things you can do to capitalise on your opportunities and reduce your risks in 2013/2014.
Capital Gains Tax Trusts
Capital Gains Tax Trusts
Capital Gains Tax Complying Superannuation Funds
Capital Gains Tax Complying Superannuation Funds
Capital Gains Tax Indexation and 50% Discount for Individuals
Capital Gains Tax Indexation and 50% Discount for Individuals
