Key tax considerations in planning merger and acquisition (M&A) transactions

Key tax considerations in planning merger and acquisition (M&A) transactions.

Mergers and acquisitions can unlock growth, but the tax settings behind the deal are often what determine whether value is created or eroded. 

Thoughtful planning at the outset helps buyers and sellers avoid surprises, protect cash flow and accelerate integration. 

    Start with the end goal and structure toward it      

The most common gap in early deal planning is not starting with a clear view of the end goal. Businesses often dive into due diligence before deciding how the target will sit within the buyer’s structure, how it will be funded and whether any new entities are needed.

Decisions such as asset versus share purchase, use of holding companies, intercompany funding, and consolidation elections can materially change outcomes on capital gains tax (CGT), stamp duty, GST on business sales, access to tax losses and future exit flexibility. Work backwards from the intended operating model and build the structure to match.  

    Plan for post-deal integration early      

Many acquisitions involve some form of bolt-on or post-deal integration. Tax considerations for integration can influence the legal path taken, the timing of entity rationalisations and the sequencing of asset transfers.

    Cross-border deals multiply complexity      

Once a transaction touches more than one jurisdiction, complexity increases sharply. In addition to Australian tax implications, buyers must navigate:

• Transfer pricing policies and documentation quality.
• Hybrid mismatch rules and their impact on funding flows.
• Permanent establishment and withholding tax exposures.
• Interaction with double tax agreements.

Transfer pricing has shifted from a background consideration to a frequent deal issue in recent years. Robust support for transfer pricing positions, including margins and intercompany pricing is now a prerequisite for confident deal decision-making.

    Use governance to drive consistent risk decisions      

Highly acquisitive groups benefit from a clear tax governance framework. 
This outlines how risks are identified, when they are accepted or remediated, who can approve them, and how they are monitored post-completion.

A practical tax governance framework improves the quality and speed of decisions during a transaction and ensures newly acquired businesses slot into existing controls, reporting and compliance calendars without disruption.  

    Collaborate across workstreams to avoid gaps      

Tax, financial, legal and commercial workstreams often run in parallel under tight timelines. 
Issues can be missed if findings are not brought together. Best practice includes regular cross-workstream touchpoints to reconcile red flags, align on materiality thresholds and ensure warranties, indemnities and purchase price mechanics reflect identified tax risks.  

Thinking about a transaction? 

RSM can help you plan a tax-efficient structure, run focused due diligence, and integrate with confidence. Get in touch with Tony Fulton and the RSM tax services team to discuss your M&A objectives.