The Australian Taxation Office has announced the issuance of Taxpayer Alert (TA) 2020/4 on multiple entry consolidated groups avoiding capital gains tax.
We are currently reviewing arrangements which appear to be designed to avoid the inclusion of capital gains in the assessable income of Australian-resident entities upon the disposal of their assets (underlying assets).
The arrangements involve:
The arrangements typically display some or all of the following features:
In relation to arrangements involving ET-1 companies, Taxpayer Alert TA 2019/1 Multiple entry consolidated (MEC) groups avoiding CGT through intra-group debt should also be considered. In TA 2019/1, we expressed concerns about arrangements designed to reduce or avoid capital gains tax where the new ET-1 company is funded through the use of related party loans rather than equity. The arrangements of concern in TA 2019/1 involve underlying assets which are more likely to be taxable Australian real property and the sale of the ET-1 company accompanied by either the refinancing of the related-party loans by the purchaser or the sale of the loans directly to the purchaser.