MGS Private

MGS Private provides advice on Capital Gains rollovers, restructures and consolidations. These provisions play a crucial role in managing tax implications during various events. Here’s a concise breakdown:

Rollovers

1. What is a CGT Rollover?
• A capital gains tax (CGT) rollover allows you to defer or disregard a capital gain or capital loss until a later CGT event occurs.
• A CGT event refers to different types of transactions or events that may result in a capital gain or capital loss. Examples include selling your business, transferring assets, or changing ownership structures.
2. Why Are CGT Rollovers Important?
• Benefit: CGT rollovers allow businesses to defer or disregard capital gains or losses.
• Relief: Businesses can choose to roll over their gain or loss for up to two years if they buy a replacement asset or improve an original asset.
3. Types of CGT Rollovers:
• Same-Asset Rollovers:
• Replacement Asset Rollovers: When you replace an asset, the cost of acquiring the replacement asset is replaced by the cost of acquiring the original asset.
• Examples include:
• Disposing of assets to a wholly owned company.
• Acquiring replacement assets after a CGT event involving small business assets.
• Exchanging shares or units within the same company or trust.
• Converting property to strata title.
• Replacement-Asset Rollovers:
• Involuntary Disposal Rollover: If your CGT asset is involuntarily disposed of (lost, destroyed, or compulsorily acquired), you can roll over your CGT liability. This defers your tax liability on any capital gain from the involuntary disposal.

Remember, CGT rollovers provide valuable flexibility for businesses and individuals, allowing them to manage tax consequences effectively. If you have specific scenarios or need further clarification, please do not hesitate to contact MGS Private

Restructures

These are essential when your business evolves, and you need to adapt your structure for various reasons. Here’s a concise overview:

1. Business Restructuring:
• Definition: Business restructuring involves changing your business’s organizational structure to better align with your evolving needs.
• Reasons for Restructuring:
• Asset Protection: To safeguard your assets.
• Introduction of New Business Partners: When new partners join your venture.
• Changes in Business Model: Adaptations due to market shifts or growth.
• Common Changes:
• Entity Type: Switching from a trust to a company or vice versa.
• Introducing Additional Entities: Expanding your business group.
• Reorganizing Existing Group: Adjusting internal relationships.
• Tax Policies and Procedures:
• Adopt tax policies for group restructures well in advance.
• Seek external advice and consider formal private rulings if needed.
• Mergers and Acquisitions:
• Complex tax issues arise during takeovers, mergers, and asset sales.
• Consult tax advisers and engage with the ATO for clarity.
• Market Valuations:
• Market value plays a role in many restructures.
• Independent valuations are crucial for complex or contentious issues.
• Address high-risk valuations in tax governance principles.
2. Small Business Restructure Rollover:
• Purpose: Provides flexibility for small businesses to change their structure without triggering significant tax liability.
• Eligibility: Applies when all parties involved are small business entities.
• Tax Advantages: Significant, but strict guidelines apply1.
3. Insolvency Reforms:
• Support for Small Businesses: New reforms help small businesses restructure and survive economic impacts (e.g., due to COVID-19).
• Faster Winding Up: If restructuring isn’t feasible, businesses can wind up faster, benefiting creditors and employees2.

Remember, navigating business restructures involves legal and tax complexities. Seeking professional advice ensures you make informed decisions. If you have further questions, contact MGS Private.

Consolidations

These provisions allow wholly owned corporate groups to operate as a single entity for income tax purposes. Here’s a concise overview:

1. Consolidation Basics:
• Definition: Consolidation enables a company that owns 100% of another company, trust, or partnership to operate as a single entity for income tax purposes.
• Tax Treatment: The consolidated group lodges a single income tax return and pays a single set of pay-as-you-go (PAYG) instalments.
• Irrevocable Choice: Once a group consolidates, it’s an irrevocable decision.
• All-In Approach: If a group consolidates, all eligible wholly owned subsidiaries become members of the consolidated group.
2. Consolidation Pathway:
• To operate as a consolidated group, the head company must:
• Make a choice to form a consolidated group with effect from a specific date.
• Notify the ATO of this choice using the approved form within the prescribed time.
• Calculate, report, and pay the group’s PAYG instalments3.
3. Costs and Benefits:
• Costs: The consolidation process incurs some costs.
• Benefits: Post-consolidation, there can be continued cost benefits.
• Further Information: Access additional details in the ATO’s reference manual or reach out to us for technical inquiries1.

Remember, ATO consolidations simplify tax compliance for wholly owned corporate groups. If you have specific scenarios or need more information, contact MGS Private.