The new small business restructure roll-over provisions are generous but caution is required, Linda Tapiolas, a partner at Cooper Grace Ward Lawyers, told guests at a well-attended seminar in Brisbane on 30 August, 2016.
The seminar was aimed at explaining the recent changes to allow small businesses to transfer active assets from one entity to one or more other entities, on or after 1 July 2016, without triggering any adverse income tax consequences (including capital gains tax or Division 7A).
‘While the roll-over appears very attractive, there are a number of traps, and care must be taken to ensure all conditions are met before applying it,’ Ms Tapiolas said.
‘The roll-over is particularly useful where there are pre-CGT assets, as those assets can retain their pre-CGT status after the roll-over. Another benefit is that direct income tax consequences are ignored, including under Division 7A,’ she said.
‘Unlike other roll-overs, there is no restriction on the type of entity that we can roll from and to, so it opens up new opportunities to roll from and to entities previously not available.
‘Traps include that transferring to and from non-fixed trusts will require the trust to make a family trust election. This means that before implementing a roll-over involving a non-fixed trust, advisers must consider whether the trust is eligible to make a family trust election, and whether there are any practical implications of making it. It is also important to consider what other tax issues may be triggered, such as duty and GST as the roll-over does not provide any concessions from them.
‘Finally, at this stage there is still quite a degree of uncertainty about the roll-overs and how they will work in practice, despite a 1 July 2016 start date.’
Ms Tapiolas is a partner at law firm Cooper Grace Ward and specialises in providing tailored advice and support services to accountants, financial planners and other professional advisers. She provides technical advice on complex tax, CGT and fringe benefits tax issues, as well as acting on business sales and acquisitions.
