Grinch spoils the party, page-35

KKLL

I got so involved in the accounting and taxation issues generically, which included Googling for information, that I did not respond to your specific question. But before I answer your question in this post, let me first give my view on tax deductibility in Australia.

Tax Deductibility in Australia

The ATO does not allow expenses accepted as tax deductions in the past to become expensed again by a business acquirer.

If the seller of a business had items taken up as debits to balance sheet assets, rather than expenses to trading accounts, then what the seller had not subsequently expensed (depreciated, amortised or impaired) probably gives rise to asset values that the acquirer can write down that would enjoy tax deductibility. Goodwill and Customer Relations are two examples of items that one would typically not find in the seller's balance sheet, unless the seller had acquired these via an earlier acquisition, and in that case such intangible assets would not give rise to tax deductible write-downs, because originally some other party obtained tax relief from the expense.

Your Question

Your question was, “Do you think this means that the BGC Contracting 'Brand name' will be valued at $0? And, given that 'Brand names' do not amortise, is that not a bad outcome as most of the $21m intangibles (except the Diab brand name) will probably amortise and be tax-deductible?”

My answer to the first question is yes, the Brand Name would not be valued.

As for the remaining $21m intangibles, I do not know what NWH classified as Goodwill, which is the gap between what NWH paid for the business, and what it has taken up as specific assets, including intangibles other than Goodwill. Also, in spite of changing the business name, there could still be an intangible asset like Customer Relations that would be amortised, but the expense would not be tax deductible.

RCRMT and Golding

Because the delta between the asset valuation (various debits) and the price paid for RCRMT was a credit taken up as a “Profit on Acquisition” we know that there was no “Goodwill”. Any value of the RCRMT business name would not be amortised, because it probably did not sit in RCRMT's balance sheet. If in future such business name (whatever called - e.g., Brand Name) is impaired, the ATO would disallow that debit as tax deductible. Customer Relations would be amortised, but the debits would not be tax deductible. IP (patents and similar things with a finite life, and which were on the sellers balance sheet) would be amortised, and this would be tax deductible.

The Golding acquisition included Goodwill that would potentially be impaired in future, but that would not be a tax deductible expense. Its Customer Relations would be amortised, and that too would not be tax deductible. I am unsure if there was much else, but had there been items like patents and software on Golding's balance sheet, they would be amortised, which would be tax deductible.

PS – its nice to know that the tunnel boring in Melbourne is not our problem. https://www.abc.net.au/news/2019-12...-project-grinds-to-halt-amid-dispute/11779986