On 8 March 2016 the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016 received Royal Asset.
This Bill provides small businesses with a new roll-over for gains and losses arising from the transfer of CGT assets, trading stock, revenue assets and depreciating assets as part of a change in the legal structure of the business.
The amendments are designed to make it easier for small business owners to undertake a “genuine” restructure by allowing them to defer gains or losses that would otherwise be realised when business assets are transferred from one entity to another. The new small business roll-over is in addition to roll-overs currently available where an individual, trustee, or partner transfers assets to, or creates assets in, a company in the course of incorporating their business – simplifying the existing Small Business Capital Gains Tax concessions.
To be eligible for the roll-over:
- each party to the transfer must be either a small business entity ($2mil turnover test), or connected with a small business entity, for the income year during which the transfer occurred;
- there is no change in the ultimate economic ownership of any of the significant assets of the business (other than trading stock) that were transferred under the transaction;
- those significant assets continue to be active assets;
- there is no significant or material use of those significant assets for private purposes; and
- both the transferor and transferee must be residents of Australia.
The changes will take effect from 1 July 2016.
The only remaining impediment to restructuring a small business entity will be the potential for State and Territory Duty.
The potential to fix inappropriate structuring choices, or to gain asset protection by transferring passive assets out of a business entity, has now become a little easier.