Liquidating a company to avoid tax
This is important if you: Under tax law, you must provide certain information to a super fund when an individual (including a sole trader or partner in a partnership), company or trust rolls over an eligible termination payment consisting of a CGT-exempt component to a super fund.You do not have to use this form but it can help you: If you are a private company owner, under tax law you must treat your private expenses separately from your company expenses.If you meet specific conditions, we may disregard a deemed dividend that would otherwise arise under Division 7A, or allow you to choose to frank the deemed dividend.See also: In general, the normal CGT provisions apply to an act carried out by a liquidator, as if the act had been carried out by the company.In certain situations, the character of these amounts does not 'wash out' in the course of liquidation distributions as it would if made prior to liquidation.For example, a pre-capital gains tax (CGT) capital gain in the hands of the company may retain its tax exempt status when distributed by a liquidator, but may lose its exempt status if distributed prior to liquidation.CGT arises when you sell or dispose of assets you acquired on or after 19 September 1985 (post-CGT assets), minus any capital losses.
TD 2000/5 explains how capital losses are treated in the context of TD 95/10.
See also: A buy or sell agreement sets out an arrangement designed to protect the interests of the departing owners and the remaining owners, while preserving the business itself.
There are two key features to a buy or sell agreement: You need to complete the Capital gains tax cap election if contributions have been made to your super fund during the financial year, from the disposal of certain small business assets.
Next step: Division 7A also applies to debt forgiveness.
If a private company forgives all or part of a debt owed by you when you are a shareholder or an associate of a shareholder, the debt may be treated as dividends under Division 7A.