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Tax issues

Tax issues. Presented by Stephen Bladwell Indirect Tax Partner. SETTING THE SCENE. $6b IN DISTRESSED CLUB/PUB ASSETS LAND = PRINCIPAL CLUB ASSET LAND/LOCALITY – KEY TO – EXISTENCE/ OPERATION CLUB STRUCTURE DIFFICULTIES IN LAND DEALINGS DEGREE OF DISTRESS ABILITY TO EXTRACT VALUE.

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Tax issues

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  1. Tax issues Presented by Stephen Bladwell Indirect Tax Partner

  2. SETTING THE SCENE • $6b IN DISTRESSED CLUB/PUB ASSETS • LAND = PRINCIPAL CLUB ASSET • LAND/LOCALITY – KEY TO – EXISTENCE/ OPERATION • CLUB STRUCTURE DIFFICULTIES IN LAND DEALINGS • DEGREE OF DISTRESS ABILITY TO EXTRACT VALUE

  3. PRE TAX CONSIDERATIONS • DEVELOPMENT NO PANECEA FOR BAD BUSINESS • BAD BUSINESS + DEVELOPMENT = DISASTER • NATURE OF DEVELOPMENT IMPORTANT • TRAFFIC FLOWS? • RENTAL STREAM / TIMING / QUANTUM • CASH INJECTION / TIMING / QUANTUM • JV BUSINESS / CALCULATION OF REVENUE • SALE / LEASE BACK / CALCULATION OF LONG TERM COST • “BEWARE GREEKS BARING GIFTS”

  4. TAX ISSUES CGT / INCOME TAX • LAND = CAPITAL ASSET = SALE SUBJECT TO CGT • LEASE/JB INCOME NOT MUTUAL • AGED CARE NO TAXABLE INCOME? GST • TIMING OF PAYMENTS EARLIER OF INCOME OR (PART) RECEIPT • TIMING OF CREDIT EARLIER OF INCOME OR (PART) PAYMENT • QUANTUM OF LIABILITY/CREDIT CASH + MARKET VALUE OF NON CASH CONSIDERATION

  5. Sale of Property v P $3.25M Lease of Premises $1 P.A. for 5yrs GST and the Clubs’ Industry 5. Land Vendor sells property for cash and lease back agreement

  6. (2) $15,000 (2)(b) $15,000 (1) $475,000 (1) $475,000 v P Sale (1) (a) Lease Back (2) (b) GST and the Clubs’ Industry 5. Land • Total consideration for land $4.75M? Stamp duty payable on $4.75M? • Leaseback valued at market $150k+ pa • When are liabilities met and credits claimed? • Will both parties issue invoices? • Will issue of invoice for (2) trigger an income tax liability?

  7. EXAMPLE 2 (a) • DEVELOPER TO BUILD 50 UNITS • CLUB TO RETAIN 7 • 42 REGISTERED IN D’S NAME • GST GROSS UP ON ALL CONSIDERATION • BROAD PROPOSAL = LAND FOR UNITS

  8. EXAMPLE 2 (b) GST on Transfer of units **$1,544,086 NIL $1,289,392 ATO QCC ATO Building Services (Net sale proceeds plus GST UNITS Cash Market value GST $16,929,000 plus $1,692,900 ATO ATO ATO GST $1,692,900 Sale of units $16,929,000 Individual Assuming all units are sold for $220,000 Input tax credits in relation to development $1,436,364 Building expenses for Units $15,800,000

  9. EXAMPLE 2 (c) – ECONOMIC ANALYSIS • VALUE OF LAND ($3.5M) ≈ VALUE OF 8 UNITS • CASH COST • GST PAYABLE OF T’FTO D $1,544,086 • GST PAYABLE ON SUPPLY BY D $1,692,900 • GST INPUT CREDIT ($1,413,659) $1,823,327 CASH COST

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