Government Initiatives – Small Business Restructure Simplification

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The government released draft legislation on 5th November 2015 in relation to 2015-16 Budget proposal to present a roll-over to permit small businesses to change their legal structure without any CGT liability.

Small businesses may find that their appropriate structure may change over time or perhaps a new small business may select an initial legal structure which later becomes unnecessarily complex. Restructuring a business into more suitable legal structures may assist in its development and growth. Alternatively, the business can avoid subsequent compliance costs from using overly complex structures. Currently, when a restructure necessitates business assets being transferred from one entity to another, it may result in significant income tax liabilities. These tax issues will then impact on cash flow and available capital and may hinder the ability to restructure.

The exposure draft proposes amendments that will assist small business owners simplify the process of restructuring by permitting them to defer gains or losses, as an alternative to realizing the gains and losses when business assets are transferred from one entity to another.

The Budget announcement referred to a roll-over CGT liability. However, the exposure draft extends the relief to the transfer of trading stock, revenue assets and depreciating assets.

It is proposed that the amendments will apply to transfer of assets occurring on or after 1 July 2016.

 

‘Government Initiatives – Small Business Restructure’ Taxation in Australia (November 2015): 298. Print

The Federal Government’s “Innovation statement”

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The Federal Government has published an “Innovation statement” aimed at making Australia a clever country and drive innovation. The Australian Financial Review has listed 11 offers from the Federal Government’s innovation statement worth more than $1 billion dollars.

  1. Stable science investment: By far the largest funding is reserved to provide stable funding for science infrastructure. It will receive $459 million in total over 4 years, with most funding starting in 2017.
  2. Tax: Investors will be able to get a 20% tax offset, instead of a deduction or capital gains tax exemption. This tax offset will benefit people more evenly across income groups. This will cost $106 million over 4 years, with most funding starting from 2017.
  3. Start-ups: The established start-ups will be offered a 10% tax rebate for venture capital investments to expand existing start-ups.
  4. Bankruptcy: Laws will be changed to reduce the default bankruptcy period from 3 years to 1 year, and the ‘same business test’ will be replaced with ‘predominantly similar business test’. This will allow business to access past losses and this new law will be introduced in the first half of 2016. There are no additional costs with this change.
  5. University funding incentives: The government will allocate $127 million over 4 years of research block grant funding towards collaboration between industry and universities.
  6. Visas: A new entrepreneurs visa will be created to attract international talent, and post-grad students with STEM or ICT talent will be fast-tracked permanent residency to be commenced by November 2016. This will cost $1 million from 2015 to mid-2017.
  7. Offshore ‘landing pads’: Australian entrepreneurs will be able to travel with a new visa type more easily to Silicon Valley, Tel Aviv and three other unknown locations, likely in Europe and Asia. This will cost $18 million over 4 years.
  8. Cyber security: A new “Cyber Security Growth Centre” will be established costing $22 million over 4 years, to be set up by mid-2016. An additional $15 million over 4 years will go to quantum computing.
  9. Government body: A new board in the Industry Department called Innovation and Science Australia will be created, along with a new innovation and science committee of cabinet.
  10. Summer schools: More funding will be given for school coding programs for year 5s and 7s and ICT summer schools for year 9s and 10s. This will cost $84 million over 4 years and will begin in 2016.
  11. CSIRO: $200 million will be returned to CSIRO from the government. This is placed into an innovation fund aimed at co-investing in new companies and existing start-ups established by CSIRO, publicly funded research agencies or universities.

The original article can be found at:

http://www.afr.com/news/politics/innovation-statement-at-a-glance-20151206-glgwza

Deceased Estates

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At Hurley & Co our goal is to assist individuals where they have the role of managing tax responsibilities of a deceased estate.

Deceases estates hold the assets of the deceased person in trust from the time of death until all property and assets are transferred to beneficiaries nominated in the will. This is administered by either of the following:

  • An executor appointed in the persons will, or
  • An administrator appointed by the Supreme Court

If you have been appointed as the executor or administrator of the estate you will have the responsibilities of carrying out tax obligations of the estate. This could include but is not limited to the following:

  • lodging tax returns for all years and a final tax return for the deceased
  • lodging trust tax return for the estate
  • providing necessary tax information to beneficiaries regarding distributions made to them to assist with tax return preparation
  • In some cases paying the tax liability on behalf of the beneficiaries not presently entitled

As the executor you might have a Capital Gains Tax (CGT) event and have to manage the implications. There are special rules set by the ATO that applies to deceased estates that allows CGT assets to be transferred without a tax liability if the asset passed to the executor, to beneficiary or from executor to beneficiary.

However, a CGT liability may arise if the assets are sold and the proceeds distributed to beneficiaries through the estate procedures.

At Hurley & Co we can help with meeting the above obligations and completing the work to assist with getting the estate finalised to ease the pressure and also to meet the legal obligations of the executor.

Please call John Hurley at our office (02-9954-3843) if you are in the role of Executor or you have any questions regarding this issue.

The ATO is now making an effort to make it easier to finalise a deceased estate given the complexity of the issue and has released the following correspondence.

Please follow the link below for more information about the deceased estate on the ATO website.

https://www.ato.gov.au/Tax-professionals/Newsroom/Your-practice/Making-it-easier-to-finalise-deceased-estates/