When businesses grow and develop, changing your business structure (e.g. from sole trader to a company) often becomes necessary to accommodate new partners and employees or to ensure that assets are protected against the usual business risks. This is also known as business restructuring.

Transferring assets in business restructuring

Restructuring involves transferring assets from one business structure to another, usually without cash changing hands between entities. Previously, this type of asset transfer was taxable as if sold to a third party. Under the new Small Business Restructure Rollover (SBRR) provisions, a small business can now transfer specific assets without incurring income or capital gains tax liabilities. If you are contemplating business restructuring, your first step is to consult an experienced tax advisor who can determine whether you qualify for the SBRR concession.

Who are eligible for tax exemption under the SBRR provisions?

As the statute’s title implies, the tax concession for small business restructuring is available only to small businesses where each party to the transfer of assets must be a small business entity. Contact the ATP Tax Accountants Pty Ltd to find out if you qualify for this tax concession.

Genuine restructure

Further, an essential requirement for the SBRR concessions is that the change in business structure is intended for an ongoing business and is not a tax scheme for an entity that is in the process of winding down or disposing a business. The following are considered as genuine restructuring:

  • Raising new capital
  • Asset protection
  • Maintaining key employees
  • Simplifying a business owner’s affairs

Ultimate Economic Ownership

There must also be no material change in the person who ultimately beneficially owns the asset being transferred. For businesses with more than one individual with ultimate economic ownership, the transfer should result in the same individual share of ultimate economic ownership.

Liability for other taxes

While the SBRR law exempts qualified businesses from income tax and capital gains taxes that would have been due on the transfer transactions, the small business entity may still be liable for the Goods and Services Tax, Fringe Benefits Tax and Transfer Duty.

At ATP Tax Accountants Pty Ltd, our tax and financial advisors can help you develop your business by providing you with options for restructuring your business. Call us at 1-300-829-484 or email rafiq@ATPtax.com to learn more about small business restructuring and its benefits.

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