Simplifying your corporate affairs will free up time, and save you money. Overly complicated group structures and maintaining redundant entities erode profits through unnecessary costs each year.

A Corporate Simplification program is a careful review of corporate structures which identifies entities that can be removed and deregistered. Corporate simplification focuses on delivering efficiency to your corporate structure by improving corporate governance and transparency, improving tax efficiency, reducing director exposure and streamlining group structures.

Where an entity is no longer required, a member’s voluntary liquidation may be necessary, whereby a solvent entity is liquidated. Such liquidations are often undertaken where there is a tax advantage that can be realised. They are also relevant where an entity is seeking certainty that all assets and liabilities have been addressed, or if an entity does not meet ASIC’s deregistration requirements. The benefits of a member’s voluntary liquidation include:

  1. Taxation benefits applicable to liquidators’ distributions of pre Capital Gains Tax reserves. In a member’s voluntary liquidation such distributions retain their tax exempt status.
  2. The member’s voluntary liquidation process includes obtaining taxation clearances from the appropriate taxation authorities.
  3. There is less risk for directors and improved corporate governance.
  4. Due to the formal advertising process that occurs during a member’s voluntary liquidation any debts which might be claimed after de-registration cannot be enforced. 
  5. After completion of the liquidation the process to reinstate a company’s registration is more difficult and may require application being made to Court and cause shown as to why the company should be reinstated. 

Although companies may be eligible to simply apply to ASIC to have their corporate registration cancelled, under the deregistration process there is not the same level of diligence undertaken nor comfort provided to the directors compared to a member’s voluntary liquidation. Further, if a deregistration process is followed any creditor or the ATO can apply to ASIC to have the company re-instated, which is a fairly simple procedure.  

With 30 June quickly approaching, now is a great time to consider whether you have any dormant entities or entities that may benefit from a solvent member’s voluntary liquidation.

Michelle Gorrie, Senior Manager – Advisory Services, T +61 7 3222 0321, E michelle.gorrie@au.gt.com