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New Tax Concessions when Restructuring Your Business

Article By | | Business Consulting

When starting your business, choosing an appropriate structure is an important decision. Whether it is a sole trader, partnership, trust, company or a group of entities, what was the right structure in the beginning, can change over time.

Previously, to transfer a business between structures you own, the increase in market value of business assets could be taxable as if sold to a third party. This means an income tax liability could arise when no cash has changed hands.

From 1 July 2016, the new Small Business Restructure Rollover (SBRR) provisions allow more small business entities with aggregated turnover of less than $2 million, the opportunity to restructure business assets into different structures without incurring capital gains tax (CGT) or income tax consequences.

Eligibility and requirements

  • It must be a genuine restructure of an ongoing business and not a tax driven scheme or restructuring to wind down or dispose of a business. Reasons for a genuine restructures can include:
    • Asset protection
    • Maintaining key employees
    • Raising new capital
    • Simplifying your affairs
  • It applies to the transfer of active assets that are CGT assets, depreciating assets (e.g. plant and equipment, furniture and fittings, motor vehicles), trading stock or revenue assets and is not available for any other business assets. Active assets are assets used, or held ready for use, in the course of carrying on a business;
  • Each party to the transfer must be a small business entity;
  • There must be no material change in the person who ultimately beneficially owns the asset;
  • The rollover will not apply to a transfer to or from an exempt entity or complying superannuation entity.

While SBBR provides a rollover for CGT and income tax implications, other taxes such as Goods & Services Tax, Fringe Benefits Tax and Transfer Duty may still apply.

Contact your Altitude Advisor to discuss the opportunity you have to restructure your business.