As tax advisors we perform two types of work – we advise on the best course of action in relation to proposed transactions, and we help people deal with the consequences of transactions that have been carried out without having given proper consideration to tax issues.
The way you structure a transaction at the outset has implications for you every year that the transaction covers, and can have immediate implications for your current year tax return. For example, changing the terms of an agreement may inadvertently trigger a capital gains tax or GST liability despite the fact you never actually received anything?
I understand there are reasons why people do not seek tax advice at the outset. They are generally already paying commercial lawyers to draw up contracts, and they place trust in those lawyers to get things right. The lawyers may have picked up some structuring basics from other deals they have been involved in, or from their studies, or from talking to other lawyers. People incorrectly assume that lawyers are proficient in all laws including tax law.
But most general commercial lawyers – as good as they might be – do not have detailed tax knowledge. Many lawyers have a general understanding of the tax laws but you must bear in mind that the tax law comprises some 9,000 pages; the chapter dealing with CGT is 418 pages by itself. The devil, as always, is in the detail.
But seeking tax advice about a proposed transaction need not always be expensive; in fact, seeking advice before executing a transaction invariably will save tax. Sometimes we might just help you identify key issues. That might be just a short half hour phone call or meeting. If we think you need detailed advice, we will discuss that need with you.
If you want to chat about the tax consequences of a transaction, please contact me.