The Australian Taxation Office (ATO) has again indicated that, notwithstanding the recent turbulence in credit markets in Australia and around the world, it will continue to have a specific focus on certain tax aspects of merger and acquisition transactions. This position was reaffirmed by Ms Deborah Hastings, ATO Senior Assistant Commissioner, at a conference held in Melbourne on 9-11 October 2008 for the Taxation Institute of Australia.
In her speech, Ms Hastings acknowledged that Australia had largely defied the world-wide trend of a slowdown in merger and acquisition activity and that between 1 January 2008 and 30 June 2008 there have been in excess of US$85 billion in announced deals in Australia.
Ms Hastings noted that the ATO would have a particular focus on the following matters as they relate to merger and acquisition transactions:
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capital gains tax rollover relief on scrip for scrip deals (subdivision 124-M of the Income Tax Assessment Act 1997 (Cth) (ITAA 97));
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capital gains tax rollover relief on demerger transactions involving corporate and trust groups and shareholders and unitholders of those groups (division 125 of the ITAA 97 and section 44 of the Income Tax Assessment Act 1936 (Cth) (ITAA 36));
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special and/or final dividends paid in order to reduce the purchase consideration payable to shareholders of the target (see the anti-avoidance provisions in subdivision 204-D of the ITAA 97 and section 177EA of the ITAA 1936); and
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capital gains tax payable by non-resident taxpayers (division 855 of the ITAA).
Ms Hastings also noted that the ATO would consider, among other things, the “drivers and outcomes [of the relevant transaction] from both a commercial and tax perspective” when it makes rulings on the tax aspects of merger and acquisition transactions. This is of particular importance for consolidations and demergers.
The comments by Ms Hastings are broadly in-line with the ATO’s 2008-2009 Compliance Program that was released in August 2008 (Compliance Program). The Compliance program, among other things:
A full copy of Ms Hastings’ speech can be accessed by clicking on the link below:
Deborah Hastings, ATO Senior Assistant Commissioner, 9-11 October 2008, Taxation Institute of Australia Conference, Melbourne.
For more information, please contact
John Reen, Partner, T: +61 2 8233 9572, E: john.reen@dibbsbarker.com
Steven Torresan, Associate, T: +61 2 8233 9751, E: steven.torresan@dibbsbarker.com
