Acquiring a new business

Learn whether you need to conduct a commercial or tax due diligence process when acquiring a business or entity.

When acquiring a business or entity, consider whether to conduct a commercial or tax due diligence process to identify and manage all risks associated with your new investment. Document the tax due diligence undertaken for business acquisitions that exceed a certain size or carry significant risks.

If you don’t conduct a detailed due diligence, ensure the risks associated with your investment have been adequately considered through other means, such as in discussions with your advisers and warranties in your purchase contracts.

When purchasing the shares in an existing business, you may be accepting the risk associated with that company’s tax history. A tax due diligence process will help you factor the tax compliance ‘health’ of a prospective business purchase into your negotiations and identify existing tax risks that need to be mitigated.

If you operate a consolidated group for income tax purposes and you acquire 100% of the interests in another business it will generally join your consolidated group. The acquisition process may give rise to tax issues that attract our attention, particularly in relation to the allocation of costs to assets and the transfer of tax losses into the group.

Need help? Please contact Krystal Advisory at 0473144739 and email at admin@krystaladvisory.com.au.