Yesterday, 29 February 2016, Parliament passed legislation that will allow small businesses to change their legal structure without attracting a capital gains tax (CGT) liability at that time.
Assistant Treasurer and Small Business Minister Kelly O’Dwyer said:
“Small business owners who find they are using a legal structure that does not suit their needs will no longer be stuck with that structure. This will allow them to restructure their business without incurring an immediate CGT liability.
This Bill will reduce risk and complexity and make it easier for businesses to grow”.
The Small Business Restructure Roll-over Bill, introduced into Parliament on 4 February, will apply to transfers occurring on or after July 1, 2016.
The legislation will allow small businesses to defer gains or losses that would otherwise be realised when assets are transferred between entities upon a genuine restructure of an ongoing business.
Not only limited to CGT rules, the relief also provides small businesses with a new roll-over for gains and losses arising from the transfer of active assets that are trading stock, revenue assets, and/or depreciating assets. It will also allow some small businesses to avoid triggering Divisions 7A.
There are a number of conditions that will need to be met under the new rules, including the requirement that the transfer does not result in a change in the ultimate economic ownership of the assets.
The relief is the final piece of the Government’s “Growing Jobs and Small Business” package, announced in the 2015-16 Federal Budget. The package was designed to support growth and employment, and included: tax cuts for every small business; accelerated depreciation for assets less than $20,000; an immediate tax deduction for professional expenses; CGT roll-over relief; and FBT changes for electronic devices. Read our Budget brief for more about the Growing Jobs and Small Business package.