Business
Acquisitions - Due Diligence
Dated: September 2004
A purchaser of a business entity may inherit unexpected tax liabilities unless a detailed tax due diligence process is undertaken to identify undisclosed liabilities.
It is prudent to work through a detailed tax due diligence checklist for any acquisition. Common 'hot' areas for review as part of tax due diligence include:
- income tax, fringe benefits tax, payroll tax and Work Cover returns to ensure all liabilities have been dealt with;
- the entity's GST issues and compliance;
- the impact of tax consolidation - is the entity from an existing consolidated group so it may have joint and several liability for group taxes?
- recent acquisitions, disposals and restructures that may trigger CGT events;
- potential tax liabilities under various loan arrangements; and
- the need for tax warranties and/or indemnities from the vendor where issues arise.
We recommend seeking professional advice in relation to any acquisition to avoid the potential for nasty surprises.
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