Small business restructure rollover

As we announced in our 2015 Federal Budget briefing, small business restructure rollover relief has been available since July 2016. It has been a welcome initiative as one never knows how a new business will perform.  Despite the best planning and expectations, an accountant often wishes they had recommended a different structure when reality becomes known.

These rules allow a small business to transfer active assets from entity to another and do so without attracting an income tax liability. Assets include depreciating assets, stock and other active assets used in the business.  Rollover relief is not available on passive assets (including loans to shareholders).  Assets transferred will retain their original Capital Gains Tax (CGT) status in the new entity.

One needs to be mindful or wary of:-

• The restructure must be a genuine to qualify for this relief.
• After the transfer, there must be no change in the ultimate economic ownership of the assets transferred.
• Only a small business can use these rules (which means group turnover must be less than $10,000,000).
• These ATO rules provide relief from income tax; there may be GST implications.
• There might also be state government stamp duty issues.
• Tax is deferred under these provisions until such time as the assets are sold. It might be that a business may be better off by re-structuring under the Small Business CGT concessions.

Despite sounding relatively simple, these are complex provisions that should only be used after a full examination of all of the options and implications (as we have done with a number of clients). 

At MRS, we will spend today planning for your success tomorrow.

At MRS, we will spend today planning for your success.