Government offers CGT free restructuring
Getting the right structures in place for small business entities has always been difficult. The choice of structure for a new business is often influenced by cost and as the business grows a different approach may be needed.
Currently a small business can change its legal structure but will attract Capital Gains Tax (CGT) liability if that involves any change other than moving to incorporate.
A change announced in the recent Federal Budget may change that situation for the better.
The Government has announced that any restructures of small business entities (being any business with less than $2 million turnover) will attract CGT rollover relief.
With these new measures announced to apply from 1 July 2016 but the legislation to bring them into effect not yet passed it is still unclear exactly how the CGT rollover relief will apply.
But if implementation of this measure proceeds it will allow small businesses to change their structure to operate in a manner which best suits their current operations rather than being trapped within a structure that seemed the best choice when the business first commenced.
If you have been considering changing your business structure to better suit your small business now is the time to start discussions with your accountant and lawyer to take advantage of the proposed relief when it becomes available.
A word of caution
It should be noted that while the rollover may be CGT free at the Federal level it is unlikely that State or Territory governments will waive or reduce stamp duty that may apply to theses same restructures.
Businesses considering a restructure should also seek advice about how it may trigger redundancy issues with their employees due to what is technically a change of employer.
Clifford Gouldson will be following this change closely and will keep you informed as the legislation is developed and progressed. In the meantime, please contact us if you would like to discuss the best legal structure for your business.