The Intangible Capital Gains Tax Trilemma for Corporate Spin-offs

Australia’s tax consolidation regime enables a 100% wholly owned group of companies to be taxed like a single taxpayer. Basically, the head company of the group is treated as a single entity and it files a tax return addressing all of the income, deductions and assets for the whole group. Despite their extensive scope, the regime’s provisions still do not deal adequately or expressly with various capital gains tax (CGT) issues that arise when a subsidiary in a tax-consolidated group is spun-off or demerged, exiting the group. Our article deals with the CGT issues that arise in relation to three types of intangible assets commonly or potentially held by exiting subsidiaries, namely: Trade receivables; Intellectual property rights; and Goodwill.