The end of the 2016 financial year is quickly approaching and many of us are undertaking tax planning activities.
One such tax planning activity that is commonly overlooked by many business owners is that of wrapping up dormant entities.
There are many reasons associated with winding up a dormant entity, however, two reasons to consider from a tax planning perspective are:
- The ongoing compliance costs of lodging documentation with ASIC.
- The ongoing costs of lodging income tax returns with the ATO.
- Shareholders wishing to access the company’s equity in a tax effective manner.
In the ordinary course of business a distribution from pre CGT capital profits reserve is treated as a dividend in the hands of the shareholders, however, in a liquidation scenario it is treated as a return of capital. The benefit being that there may be no tax payable in the hands of the shareholder on the liquidator’s distribution of the pre CGT capital profits reserve or the shareholder may alternatively be able to access various CGT concessions to reduce any tax payable.
Shaw Gidley are experts in restructuring, turnaround and insolvency and provide free initial advice on these matters. Please contact our offices on (02) 4908 4444 or (02) 6580 0400.