Your shopping cart is empty
The earnout workout
Published on 01 Feb 19 by "TAXATION IN AUSTRALIA" JOURNAL ARTICLE
The income tax treatment of arrangements involving deferred consideration (“earnouts”) has been embarrassingly complex for tax practitioners and administrators alike. This continues to be the case, particularly for earnout arrangements that are not covered by the 2015 amendments to the capital gains tax rules. A recently released discussion paper from the ATO raises a number of consultation questions aimed at determining what future guidance is needed for those arrangements. The article analyses the current tax issues by way of a simple example and suggests that, first, greater clarity is needed to determine when earnout amounts are assessable or deductible. Second, the article suggests that the taxation of financial arrangement rules could be used to provide a more comprehensive solution to the treatment of earnouts.
Author profile
Enzo Coia CTA
Enzo Coia is a Tax Partner at KPMG with more than 25 year's experience advising on Australian tax matters associated with mergers and acquisitions. Enzo has significant expertise in advising clients in energy and resources. Enzo has advised on many significant transactions in power and utilities including renewable energy, mining and the oil and gas sectors. Enzo is a frequent presenter to industry bodies and has published many articles on mergers and acquisitions. - Current at 12 November 2025
The Tax Institute is Australia's leading professional association and educator in tax providing the best resources, professional development and networks.