Government Initiatives – Small Business Restructure Simplification
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