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Goodwill is not a concept that is new on the tax landscape but as more and more value finds its way into property that cannot be seen or touched, goodwill is one of the items of intangible property that attracts increasing attention – from tax authorities and taxpayers alike.

In this new book, Proposals for the reform of the taxation of goodwill in Australia, Michael Walpole, Associate Professor in the Australian School of Taxation, demonstrates how aspects of the law of goodwill infuse the tax law – from the duties on property levied by Australian States, through income tax laws to the federal capital gains tax, international tax and Goods and Services Tax. This unique cross sectional study of goodwill across the tax laws shows how these laws throw up anomalies and sometimes conflicting treatments of goodwill, with states taxing what the federal system relieves from tax and mixed signals and incentives being provided by the tax system in its application to goodwill. And yet there is not widespread agreement amongst the professions involved in tax as to what goodwill is. The legal and accounting meanings of the term parallel one another and often overlap but they are not the same.

Developing a coherent policy for the taxation of goodwill challenges us to agree on what it is – and how best to treat it consistent with desirable canons of taxation. This work identifies a set of desirable principles and tests the Australian tax treatment of goodwill against them. Walpole concludes that reforms are required and identifies several options for consideration – principally a statutory definition of goodwill that will mean the professionals dealing with the tax system will have a common understanding, for tax purposes, of what goodwill is.

Proposals for the reform of the taxation of goodwill in Australia by Michael Walpole is published by the Australian Tax Research Foundation.