When buying a business, you should pay some attention to the income tax and GST issues surrounding the ongoing business so that you are pre-empting things in advance.
- How the asset list that you are buying is valued at the purchase price has a direct bearing on how much you can take as a depreciation deduction in your ongoing tax returns.
- While most business transactions are likely to be zero-rated for GST if they are the sale and purchase of a going concern, care does need to be taken to ensure what you are buying, in fact, equates to a going concern. If not, particular care needs to be made as to whether the purchase price is noted as GST inclusive or exclusive.
- If the purchase transaction is being zero-rated for GST, then you need to make sure that the purchasing entity is formed and GST-registered before the settlement date.
- The actual GST registration should be considered with care because it has an impact on the timing of when you can claim GST and when you are liable to pay GST to the IRD on your sales. Contact us to discuss this in advance of settlement.