We conduct a great many Members’ Voluntary Liquidations each year and often 30 June is a critical milestone to complete them for benefit of shareholders and their personal tax affairs. For further information on the MVL appointment process and how they can benefit your clients, you can read more here.
The purpose of this brief article is to inform advisors of the timelines set by the ATO to process the company’s final income tax return and the subsequent Liquidator’s application for taxation clearance required under section 260-45 of the Income Tax Assessment Act 1997. Knowledge of these timelines will in turn assist with the planning of a prospective MVL in order to achieve your client’s objectives.
The key tax-related aspect of an MVL is the lodgement of the final income tax return for the company to the date of the liquidation (and any other lodgements that might be outstanding up to the date of liquidation). Given software release dates, the final income tax return is often a manually entered and paper-based lodgement. The ATO has a timeframe of 50 business days to process the final return; however we normally need to follow up the ATO to ensure that it has been processed on time. Accordingly, we encourage accountants to prepare and have the final return/s ready to file with the ATO as soon as possible after the liquidation has commenced in order to streamline the process.
Once the final return is confirmed by the ATO as having been processed, the Liquidator can then apply for tax clearance required under the Act to then enable the shareholder distributions. Again, there is a processing time set by the ATO, which is 28 business days. Similarly, we set reminders to follow up the ATO in order to ensure the tax clearance application is processed on time.
From the above, you can see that before a distribution to shareholders can occur, there is a wait time of in excess of 15 weeks, assuming the final tax return is lodged immediately after the liquidation commences.
So the takeaway from this article is, if you have a client considering an MVL with a critical date of 30 June at play, it is important that sufficient planning and preparation is done and sufficient time is allowed for in order to hit the deadline. Keep this in mind as we approach the start of a new financial year when planning with your clients and consider us to assist you with the MVL process.
About the author
Greg Quin is a Partner and Registered Liquidator at HLB Mann Judd Insolvency WA and has been with the team for 12 years. Greg oversees the daily operations of the many insolvency appointments managed by the HLB Insolvency team and looks after the operations of the practice.
If you have any queries about insolvency matters, please feel free to contact Greg on 08 9215 7900, 0402 943 091 or via email to gquin@hlbinsol.com.au.
