For small businesses, there’s never been a better time to review the effectiveness of your business structure through a comprehensive business valuation.
In the last Federal Budget, the government announced new measures to allow small businesses to change their legal structure without incurring a capital gains tax liability. Draft legislation was released in November, and the new measures are proposed to commence from 1 July 2016. A small business has an annual turnover of less than $2m or net assets of less than $6m.
The new rollover recognises that the most appropriate structure for a small business may change over time. A new business might choose a legal structure that unnecessarily exposes them to personal liability, puts their assets at risk, is unnecessarily complex, or creates tax issues.
Restructuring your business can result in significant capital gains tax (CGT). CGT relief is currently available in certain circumstances, for example, where a sole trader transfers assets to a company. The proposed new rules will broaden the CGT relief to other structures. It also extends the relief to transferring trading stock and depreciating assets.
Depending on your circumstances, the existing Small Business CGT Concessions may provide other options for restructuring and should be considered in any review.
It takes time to implement a change in business structure. With the new CGT commencing in less than 6 months, now is the time to review your options to be ready for implementation by 1 July 2016. The benefits can be substantial.
Contact your client manager if you feel you might benefit from these new rules.
Kreston Stanley Williamson Team
*Correct as of January 2016
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
