A new opportunity for small business restructures

From 1 July 2016 small business owners will be allowed to restructure their affairs and take advantage of new concessions introduced by Parliament to allow greater flexibility which may lead to substantial costs savings. Under the “Small Business Restructure Roll-over Bill” owners of a small business entity, ie. an entity whose annual turnover does not exceed $2 million, will be able to change their legal structure in which they operate their business without incurring a tax liability on that transfer. One way this new measure can be used is for small business owners to move the ownership of the business assets into a family discretionary trust structure which can provide ongoing and substantial tax savings.

There are a number of conditions which must apply in order to take the benefit of the restructuring including that both the transferor and transferee of the business assets must be small business entities and Australian tax residents; the roll-over cannot include as a party a complying superannuation entity; the assets being rolled-over must pass the active asset test; the roll-over must form part of a “genuine restructure” of an ongoing business; and finally, and most importantly, there must be no material change in the “ultimate economic ownership of the assets”.

If, for example, an individual or several individuals of the same family group own assets of a small business in their own name then they will be able to take the benefit of these provisions to roll-over those assets into a family discretionary trust which can be then used to benefit members of that family in a more tax effective way.

We’d be happy to assist you if you wish to know more.

Hamish Esplin

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