Business, company and share valuation reports may be required for a range of tax-related matters. Below we detail three situations that are likely to require the preparation of an expert valuation report. We note however that the items listed below are not the only circumstances where it would be advisable for a valuation to be undertaken to satisfy taxation requirements and encourage the reader to seek independent tax advice regarding their own circumstances
The restructuring of a company or investment structure often creates requirements for businesses, companies and/or shares to be valued. The valuation is often completed to determine the fair market value of assets that are to be transferred between related parties. This ensures any capital gains tax arising from the restructure is accurately calculated and ensures the appropriate level of stamp duty is paid to state authorities.
Thin Capitalisation refers to a regime of rules aimed at limiting the tax deductions on debts available to an entity where the average level of debt in a financial year exceeds a prescribed level. The thin capitalisation regime impacts on Australian and foreign entities that have multinational investments. Entities that are highly leveraged are at risk of losing their ability to claim debt associated deductions and may be wise to seek the opinion of an independent valuer who’s advice may demonstrate that the entity’s capital structure is comprised of at least 40% equity, thus ensuring debt related costs remain deductible.
Employee Share Scheme
More and more companies are implementing Employee Share Schemes in a bid to incentivise employees, boost morale and lower staff turnover. Employee share schemes have tax implications for both employers and employees that often create the need for an independent valuer to provide an opinion of the fair market value of the shares issued under the employee share scheme.
Unlisted privately-held companies require the expertise of a share valuation expert in order to determine the fair market value of the shares so that the appropriate level of tax is paid, consistent with the employee share scheme provisions in the Income Tax Assessment Act 1997
Find Out More
If you are considering undertaking any of the above tax related matters prior to or within the next financial year feel free to contact us for a free confidential discussion about your circumstances and how we can assist.