People plan significant acquisitions from various angles. But large transactions, such as purchasing expensive equipment, taking out strategic lease, investment property or holiday house, may have different tax implications. However, tax and asset protection are often omitted. Today we will briefly analyse tax and asset protection consequences and explain how large transactions may impact your tax.
Large transactions and tax: isolation of risks and assets
Proper holding structure, such as trust, can save the asset from any problems that your business may face in the future, and can assist in a smoother financial settlement on marriage breakdown. It can also help managing tax on the yield if your family is involved. There may be additional expenses though, such as higher land tax, so you need to weight the costs and benefits and choose the most effective holding vehicle.
Take care of your cash-flow
First, you should carefully plan the source of your funds, such as new and existing loans. Consider loans to retain existing loans’ deductibility status and ensure new loans are determined as investment, so you can claim the interest. If you are using own / family money, consider if the money is subject to any tax, e.g., untaxed profits, to avoid any surprise tax bills. Also, think about proper loan agreements to allow future refinance that retains deductible character of loan.
Purchase of commercial property may also attract GST, which can be a short-term cash-flow problem. However, you can manage it and improve the cash-flow with proper planning and structuring of the purchase.
If you use assets in your business, put in place proper lease agreements to ensure deductibility of costs related to the asset from which you are generating profits.
Capital Gains Tax (CGT) on the sale of assets
When buying an asset, you should consider consequences of sale at a profit to avoid traps. If you are a small business, you might be entitled for small-business CGT concessions on Active Assets. Distributing of capital gains among the family can also make a difference in ultimate tax bill.
Your chartered tax advisor at BTMH
Given the complexity and frequent changes in tax law, you should always rely on the expertise of an accountant / tax advisor. When considering a significant investment, talk to BTMH and see if we can save you. We will do it by:
- Identifying the purpose and characteristics of acquisition
- Finding the most effective holding vehicle, given your circumstances
- Ensuring most cost-effective way, considering cost to set up and maintain the asset in its proposed structure, and tax savings / other benefits
Do you and your business need a consultation? Book you appointment today.