Tax and stamp duty

Tax and stamp duty

At Lotus Amity we are often engaged by clients and advisors to prepare business valuation reports for tax and or stamp duty purposes. The reports prepared are comprehensive and fully supported to meet the exacting Australian Tax Office requirements.

We provide valuations in relation to:

• the transfer of shares and or business assets between related parties
• intellectual property and goodwill for stamp duty purposes
• the small business threshold test for capital gains tax concessions
• the issue of shares or options under an employee share scheme
• the issue of shares for scrip roll-over relief
• the cost base of goodwill in a consolidation

Reports for the ATO

The ATO provides detailed valuation guidelines and states that the Commissioner considers a business valuation report to be more reliable, if it follows commonly accepted industry standards and contains sufficient evidence and reasoning to allow for testing or replication.

At Lotus Amity we comply with the Australian valuation standards and follow the International Valuation Standards. We provide comprehensive reports for the ATO with detailed supporting documentation, careful input analysis, consideration of all three valuation approaches, and reasoned and supported assumptions.

Our granular and detailed business valuation process avoids the four common valuation issues areas flagged by the ATO:

• Documentation: omitted, insufficient, incorrect, and or inconsistent documentation and evidence
• Analysis: lack of appropriate analysis, scrutiny of information and or verification of inputs
• Methodology: inappropriate choice and or application of methodology
• Assumptions: unreasonable, unsupported, incorrect, and or inconsistent assumptions

Further, at Lotus Amity we carry out research and model discount rates and cash flows and ensure that we avoid these other specific valuation issues raised by the ATO:

• lack of support for size, risk and other adjustments to the chosen discount rate or capitalisation multiple
• inappropriate use of averaging
• reliance on post valuation date information and future events which cannot be reasonably foreseeable at the valuation date
• the valuation approach does not align with the relevant tax provision, case law or ATO view documents

Experience

Previous valuation reports prepared by Lotus Amity for ATO purposes include:

• The valuation of the equity in a group of veterinary clinics. Valuation report prepared to establish if shareholders were eligible for scrip for scrip roll-over relief under Subdivision 124-M of the Income Tax Assessment Act.
• The valuation of a business providing demolition services, excavation services and equipment hire. Valuation report prepared in relation to the small business threshold test for capital gains tax concessions.
• The valuation of a sporting footwear and apparel retailer. Valuation report prepared to determine the cost basis for the transfer of shares to the testamentary trust.
• The valuation of a technology company providing a marketplace for auto services including retail and fleet servicing. Valuation report prepared for tax purposes in relation to the buy-back and issue of shares under the employee share scheme.
• The valuation of a national science, engineering, and technology consulting services business. Valuation report prepared for tax purposes in relation to the transfer of the business between related companies in the group structure.
• The valuation of the goodwill and intellectual property in a fabrication and fitting group. Valuation report prepared in relation to the small business threshold test for capital gains tax concessions.
• The valuation of ordinary and preference shares in a national company operating childcare centres. Valuation report prepared for tax purposes in relation to the ordinary and preference shares to be issued to employees.
• Valuation of a group providing services through the home care packages program and disability care through the National Disability and Insurance Scheme. Valuation prepared for tax purposes in relation to the transfer of personally held shares to a related trust.