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PKF Australia

Accountants and Business Advisers

Small Business Restructure Tax Rollover

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Darren Shone

Partner

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Small Business Restructure Tax Rollover

The Federal Government has today provided draft Legislation on a roll over that was announced in the 2015/16 Budget for Small Business owners that wish to change their legal trading structure with no tax consequences.

Prior to this announcement, restructures could only take place with no tax consequences on the transfer of business assets from sole traders, partnerships and trusts to company structures.

Under this rollover the following applies:

  • It is expected to apply from 1 July 2016
  • It only applies to assets of a business carried on by the small business entity to another qualifying legal structure
  • The rollover maintains the underlying tax cost of the assets transferred to their original tax cost in the hands of the transferee
  • Pre CGT assets will maintain that status
  • It is only available to Small Business owners as defined
  • Eligible small business owners can change from any type of legal structure to any other type of legal structure
    • However, the roll-over will not apply to a transfer to an exempt entity or complying superannuation entity
  • All taxpayers involved in the restructure must have an Australian tax residency requirement satisfied
  • The same underlying economic ownership must be maintained
  • There is a concession proposed so that transfers can be made to or from discretionary trusts as long as the transferring and receiving owners are part of a family group that the trust has made an election to restrict its application in respect of

This is very welcome news, especially when the proposed abolition of Stamp Duty from 1 July 2016 is proposed to take effect in NSW.

Full details of the proposed law and the explanatory material can be found here.


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