The Federal Treasury  has released for public comment Exposure Draft legislation, the Tax and Superannuation Laws Amendment (2015 Measures No 6) Bill 2015:  Small business restructure rollovers to amend the Income Tax Assessment Act 1997, to enable small businesses to defer tax consequences arising in relation to the transfer of capital gains tax assets, depreciating assets and trading stock revenue assets that occur in the context of a business restructure.

The proposed amendments aim  to provide greater flexibility for small businesses, allowing them to grow and change the legal structure through which they operate, without triggering adverse taxation consequences.

Eligibility for the roll-over extends to:

  1. an entity that qualifies as a “small business entity”, being a business (including its affiliated and connected entities) that  has an annual turnover of less than $2 million or has a maximum net asset value of less than $6 million, in the income year in which the transfer takes place; and
  2. an entity that is an affiliate of, or that is connected with, a small business entity for the income year that satisfies the maximum net asset value test at the time of the transfer, and which passively holds assets that are used by the small business entity in its business.

The roll-over is restricted to circumstances where there has been no change in the ultimate economic ownership of the transferred assets. Where assets are transferred to discretionary trusts, identifying the individuals who will ultimately benefit economically can be difficult as beneficiaries of discretionary trusts generally do not have an interest in any asset or income of the trust until the trustee has exercised its discretion. However, where discretionary trusts have made a family trust election, the members of the specified family group will be regarded as the ultimate economic owners of the business assets for the purposes of the roll-over.

Comments in relation to the Exposure Draft must be submitted to Treasury by 4 December 2015.

To discuss this article, or for further Information please contact:

Dianne Sisak Penjalov
Senior Associate
T: 03 5226 8582