Small Business Restructure Roll-Over
By Anand Shukla
During the 2015-16 budgets, the government announced that as part of the Growing Jobs and Small Business package, that a Small Business Restructure Roll-over would be introduced with the aim for small businesses to be able to change their legal structure easier and without incurring a tax liability, allowing small business owners to focus on the growth of their business.
Up until this change, where a business owner needed to transfer business assets from one entity to another during the restructuring phase, this would incur capital gain tax liability and was also only available for individual sole traders, partnerships and trusts that converted to a company structure.
With the introduction of the new roll-over, this will now allow small business owners to have greater flexibility in choosing the most suitable structure for its stage in life of the business without incurring an income tax liability and not having to worry about the negative effect it may have on their cash flow.
What is the new roll-over and what will it do
The new roll-over will disregard any gains or losses which could arise during the transfers of business assets between entities during the restructuring phase which is now available for transfers of assets from a company to sole traders, partnerships or trusts. However this does not apply to exempt entities or superannuation funds.
Who is eligible?
To be eligible for the roll-over, the entity must fall under the description of a ’small business entity’ in the income year where the transfer has taken place. It must also satisfy the ‘small business entity’ test in which the aggregate turnover for the income year was less than $2 million, or that the combined net asset value with the connected entities, is less than $6 million.
What is included?
Active assets will now include CGT assets, trading stock, revenue assets and depreciating assets as long as the following applies
- The change in structure does not result in the change in ownership of the asset and as long as the transfer was made on or after 1 July 2016.
- The transferor chooses to apply for the roll-over
- No consideration is provided
- That it is not an exempt entity or a complying superannuation entity
If you would like to find out more about the small business restructure roll over, click on the following link.
CGT roll-over relief for changes to entity structure
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