Taxation changes to simplify restructure

It is frustrating having to advise a client that the law will not enable them to achieve what they want to achieve.

This has often been the case when advising clients about business restructuring. Capital gains tax and stamp duty implications often meant the cost of change outweighed the expected benefits. Fortunately, times have changed.

During the years the federal government has legislated various changes to the CGT rules to give discounts and relief to small businesses and their owners when seeking to restructure and/or sell their businesses. 

A lot of the focus has been linked to planning for retirement, which enabled business owners to preserve the value they have built in their businesses, rather than seeing it disappear in tax on retirement. But CGT relief has recently been expanded to general restructures. 

For most of the CGT concessions, the definitionof a 'small business' is a business with an aggregate turnover of less than $2 million or net assets of less than $6m. 

With the value of farmland increasing and the scale of primary production businesses growing, these limits will soon be breached by many businesses unless they are increased.

In the new CGT restructure provisions, the definition of a 'small business' is a business with less than $10m in aggregate turnover. That definition will allow for a larger group of businesses to beneft. 

The CGT restructure relief enables businesses to transfer assets between different entities controlled by an owner without CGT payable. 

The assets simply retain their original costs for CGT purposes and, in most cases, CGT will only be triggered once the assets are sold.

Restructuring is also a critical step when planning for the effective transfer of assets to the next generation.

The state government has abolished stamp duty on the transfer of business assets such as plant, equipment and livestock and allows the transfer of primary production land between family members stamp duty free, subject to certain conditions.

Up until this point, the exemption has only been available to natural persons and family trusts, but there is legislation before parliament that will allow transfers from companies too. This is a change that will have significant impact for companies that own farmland.

Additionally, from July 1, stamp duty will be abolished on commercial property. 

These changes mean there has never been a better or more affordable time to restructure your business. 

We always recommend that clients are proactive and plan for the future and with most of the roadblocks surrounding CGT and stamp duty removed, the time is right for farmers and primary producers to effect any necessary changes before the politicians change their minds. 

This article was written by Joe Anderson and was first published in The Stock Journal on Thursday 15 February 2018. 

Practice Area: Corporate, Commercial & Business , Farm Law , Tax, Revenue & Superannuation

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