Deferred tax liability

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One of the most complex tasks in determining the inputs for reporting deferred tax liability is the calculation of notional capital losses and gains on investment and inventory assets. This, of course, takes on an even greater significance for unit-linked investment products where prices are calculated to reflect accrued but unrealised capital gains on a more frequent basis.

With the necessary information, knowledge and experience, the application of capital gains tax legislation is not difficult when taken on a case by case basis. It is however, the need for timely and consistently accurate assessment of large numbers of assets under changing ownership and market circumstances that presents the greatest challenge. That is, not only to prepare deferred tax liability assessments accurately and on demand, but also to determine the outcomes in advance for any anticipated future scenario; CGT modelling.

No limitation is placed on the number of individual 'properties' that can be defined in the model. Each is defined with its own set of simple rules and can be assessed either individually, as a group by owning entity, or even the entire portfolio. All assessments are retained for reference, building up a full history and can be recalled and reported at any time.

The model establishes the detailed disposal values of property assets which can then be applied to the property register using a bulk disposal import function. Fast, simple and accurate.

Divestment modeling incorporates its own report generator that presents the assessement outcomes in a dynamic pivot grid allowing the user to quickly design their own preferred format as a standard default. This grid has all of the characteristics of a spreadsheet without the disadvantages associated with complex formulas. Naturally, it can also be exported directly to Excel if required.

Activa has provided capital gains tax assessment for asset disposals since its original development in 1988. This unique approach utilises the details of each individual asset record to determine the appropriate outcomes and has always been a significant departure from general tax reporting software which favours the step by step Q&A approach, leaving the decision making to the user.

It was 1996 when the Divestment Model was first developed and this was done on behalf of the Federal Airports Corporation to determine the optimised [no taxable capital gain, no allowable loss] sale values of the individual airport assets back to the Australian government prior to privatisation. Since that time, the model has been updated and expanded as a standard system add-on option and is in use with a number of key clients.

CGT legislation is constantly reviewed and the software updated to ensure that it remains compliant.

Capital gains tax assessment requires a history of relevent events for each asset to identify the conditions that apply in each individual case. It is this fundamental characteristic of Activa that allows complex and consistent analysis. Activa does not sacrifice any aspect of the asset history to time and maintains all historical events as distinct events, as illustrated below for valuations and revaluation events.

Divestment Modeling is a standard add-on option to the Activa Asset Management fixed assets register. A single asset register license and the DM option is the minimum Activa software license requirement.

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Article last updated : Jul 18 2011 9:59AM