MGS Private provides advice in relation to the intricacies of transferring assets between subsidiaries within a corporate group in Australia.
This process involves moving assets from one company or unit trust to another while maintaining the overall group structure.
Understanding Intercompany Asset Transfers in Australia
- Small Business Restructure Roll-Over:
- The Australian Taxation Office (ATO) provides a small business restructure roll-over that allows small businesses to transfer active assets from one entity to another without incurring an income tax liability1.
- Eligibility:
- The roll-over applies if each party to the transfer is one of the following in the income year in which the transfer occurs:
- A small business entity.
- An entity that has an affiliate that is a small business entity.
- An entity that is connected with a small business entity.
- A partner in a partnership that is a small business entity.
- The transfer of assets must form part of a genuine restructure of an ongoing business, not an artificial or tax-driven scheme.
- The transaction must not result in a change to the ultimate economic ownership of transferred assets.
- Example Scenarios:
- No Change in Ownership: If a sole trader transfers assets to a trust where they remain the sole unit holder, there is no change in ultimate economic ownership.
- Changed Share of Ownership: When partners transfer interests in partnership assets to a company, maintaining their share of ultimate economic ownership is essential1.
- Consolidation Pathway:
- Consolidating a group involves planning and implementing new systems, calculating a consolidated income tax position, and determining asset values for joining subsidiaries.
- The head company needs to transfer losses, calculate utilisation rates, and manage franking credits and foreign tax credits2.
- Accounting Implications:
- In consolidated financial statements, intercompany income arising from asset transfers should be eliminated.
- Businesses must consider the rules for distributions in kind when transferring assets at book value.
- Transfers at market value fall outside these rules.
- Compliance with accounting standards ensures accurate reporting of group financials.
Conclusion
Transferring assets between subsidiaries in Australia requires careful consideration of legal, tax, and accounting aspects. By understanding the rules and methods, businesses can optimize their group structures while ensuring compliance with relevant regulations.
MGS Private can provide advice and solutions in relation to the transferring of assets within corporate groups.
