Small businesses are important to the Australian economy, as they facilitate growth and innovation. However, as a small business develops over time, its initial legal structure may no longer be suitable for the business. Where a business has to restructure to accommodate growth, the transfer of assets from one legal structure to another could give rise to unwanted tax liabilities, even though the underlying economic ownership remains the same.
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nOn 8 March 2016 legislation was enacted to provide a new roll-over to make it easier for small business owners to restructure by allowing them to defer gains or losses that would otherwise be made.n
nA small business entity is one that carries on a business and the combined annual turnover of the entity, and other entities that are affiliated or connected with it, is less than $2M.
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nThe roll-over generally applies to transfers that do not result in a change in the ultimate economic ownership of the assets. There is an alternative test that extends the roll-over to transfers of assets to a family trusts. To meet the alternative test, individuals who have ultimate economic ownership of the transferred asset before the transfer, and those having ultimate economic ownership of the asset after it, must be members of the same family group.
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Important: Clients should not act solely on the basis of the material contained in Update. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. This update is issued as a helpful guide to clients and for their private information.
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nThe roll-over generally applies to transfers that do not result in a change in the ultimate economic ownership of the assets. There is an alternative test that extends the roll-over to transfers of assets to a family trusts. To meet the alternative test, individuals who have ultimate economic ownership of the transferred asset before the transfer, and those having ultimate economic ownership of the asset after it, must be members of the same family group.
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