On the 4th February 2016 the Government introduced the Small Business Restructure Rollover Bill into parliament, addressing the provision of Capital Gains Tax (CGT) rollover relief for small business.
The two main positives business owners can take from the Bill are:
• The rollover relief allows CGT assets, or an entire business, to be moved from one entity to another small business entity, without incurring CGT liability at that time, and;
• Enables businesses to transfer from one entity structure as their circumstances change.
The rollover relief will only be available to a small business entity and each party to the transfer must for the relevant income year meet specific conditions.
It is outlined that this rollover is only applicable to a “genuine” restructure.
If the rollover is between qualified small business entities, the CGT asset must be an active asset. A CGT asset is ‘active’ if the asset is:
1. Used or held ready for use in a business carried on by that entity
2. An intangible asset (eg. Goodwill) that is inherently connected with a small business carried on by an entity
3. Either a share in an Australian resident company or an interest in a CGT resident trust and the company/trust has active assets that is at least 80% of the market value of all its assets.
Under the rollover provisions, the time the new entity holds the asset for CGT purposes commences at the time of the rollover. If you sell the business or equity interest that was transferred or issued as part of the rollover within 12 months there will be no access to the CGT discount.
Post the restructure, if a sale occurs after 12 months, access to the CGT discount should be available.
Generally the rollover cannot apply to non-residents. Both parties to the rollover must be an Australian resident, resident entity or resident for tax purposes.
The Bill is yet to become legislation, the effective date of the proposed Bill is 1 July 2016.
If you would like to discuss the proposed Small Business Restructure Rollover, please contact one of the team to discuss your eligibility.
Acknowledge article by REDCHIP LAWYERS – Bill Introduced – Small Business Restructure Rollover