Reassess Advisory Sourcing Ahead of Tax Reform and Valuation Demand

“Formal valuations will come at a cost, and valuations for illiquid assets such as business goodwill will not come cheap. While the valuation cost can form part of the asset’s cost base for CGT purposes, taxpayers will still need to weigh the upfront outlay against the potential tax benefit

“That will allow advisers to assess whether the increase in the actual value pre-1 July 2027 can benefit from the existing 50 per cent discount method, without the application of the new 30 per cent minimum tax rate

Treasury released consultation on the second tranche of CGT changes earlier this month, where it provided detail on how taxpayers may apportion capital gains and losses as taxpayers transition to the new CGT regime from 1 July 2027

Law firm Dentons has warned the government that if it intends to implement a revised measure from the 2018–19 budget concerning unpaid present entitlements (UPEs), it must put in place transitional protection for taxpayers that relied on the tax rulings TR 2010/3 and TD 2022/11. In its consultation paper on the proposed 30 per cent minimum tax for trusts, Treasury noted that there was an announced but unenacted measure from the 2018–19 budget to bring UPEs within Division 7A

"Transitional protection is critical

The proposed measure follows the recent High Court decision in Bendel, which held that a corporate beneficiary's unpaid present entitlement to trust income was not a loan for the purposes of Division 7A of the Income Tax Assessment Act 1936

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