Sydney, Australia

Investing in Australia – don’t lose your losses

By Peter Cohilj and Tony Nunes, Kelly + Partners Chartered Accountants

When establishing business in Australia, a foreign parent company will often incorporate an Australian subsidiary to conduct its Australian business. As the Australian company expands, the strategic acquisition and merger of an Australian competitor may occur. Forming an Australian tax consolidated group with the target can provide various advantages including:

  1. making the acquisition more tax effective for the vendor, reducing upward pressure on the purchase price;
  2. providing an opportunity to reduce risk by subsequently transferring the target’s business to another consolidated entity without income tax implications; and
  3.  providing an opportunity to “refresh” the tax losses of your existing Australian subsidiary, and those of the target, by potentially allowing these losses to be subject to a less complex set of loss use rules.

It is important to consider whether the target’s business is acquired via:

  1. money and/or scrip (shares);
  2. an acquisition of assets;
  3. by the foreign parent directly; or
  4. by one of your existing Australian subsidiaries.

The structure can have numerous implications for the type of tax consolidated group that is formed, and the ability to continue using losses.

If looking to form a tax consolidated group, you need to consider how the purchase consideration is structured. If part of the consideration involves the issuing of shares from a foreign parent, then this can cause adverse tax implications at consolidation. This is because the amount paid for the target is a key variable used in the consolidation calculations, and this will determine future deductions and the tax costs of assets. Shares issued by a foreign parent may not always constitute consideration paid. Getting this wrong can have negative implications for the tax costs you are deemed to acquire in trading stock and depreciable assets, and may overinflate future capital gains.


Tony Nunes

Tony Nunes

GGI member firm
Kelly + Partners Chartered Accountants
Advisory, Auditing & Accounting, Corporate Finance, Tax, Fiduciary & Estate Planning
T: +61 2 9933 8866
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W: kellypartners.com.au

Kelly + Partners Chartered Accountants is a specialist chartered accounting business that assists private businesses, private clients, and families to manage their business and personal financial affairs. The Kelly + Partners Tax Consulting practice is respected as one of the foremost tax advisory firms in Australia and offers the full range of direct, indirect, and international tax services.

Tony Nunes has over 22 years’ experience in providing tax advice. He has extensive experience in advising clients on issues affecting cross-border transactions, acquisitions, and restructures, and in all aspects of structuring the ownership and financing of corporations and their operations.
Peter Cohilj

Peter Cohilj

GGI member firm
Kelly + Partners Chartered Accountants
Advisory, Auditing & Accounting, Corporate Finance, Tax, Fiduciary & Estate Planning
T: +61 2 9933 8866
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: kellypartners.com.au

Peter Cohilj has over 20 years of experience as a Chartered Accountant and specialist tax adviser. His areas of specialisation include revenue authority reviews and audits, restructures for private family and corporate groups, international tax advice and employment taxes.


Published: M & A Newsletter, No. 02 Spring 2022 l Photo: Bogdan Lazar - stock.adobe.com

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