March 2016 Edition

In this edition:

Welcome

Change in legal structure - New small business CGT rollover relief

SMSF Trustees cautioned over spike in SMSF cash allocations

Main residence exemption when you own two homes - six month rule

SMSF compliance: Insured "lifestyle" assets under data mining microscope

Small businesses will be able to change their legal structure without triggering a capital gains tax liability (CGT) at that time. This legislation is in additional to rollovers currently available where an individual, trustee, or partner transfers assets to or creates assets in a company in the course of incorporating their business. The optional rollover will be available where a small business entity transfers an "active asset" to another small business entity as part of a genuine business restructure however the key to be able to use this relief is that the ultimate economic ownership of the asset must remain unchanged. E.g. same ownership percentages maintained.

According to the Small Business and Assistant Treasurer Kelly O'Dwyer "Small business owners who find they are using a legal structure that does not suit their needs will no longer be stuck with that structure. This will allow them to restructure their business without incurring an immediate CGT liability." According to the ATO in order to qualify for the rollover, the transfer of the asset or assets must be part of, a "genuine" restructure of an ongoing business, as opposed to "inappropriately tax-driven schemes". 

To be eligible for the rollover, each party to the transfer must be either: 



• a "small business entity" with $2 million or less in turnover for the income year during which the transfer occurs 
• an entity that has an "affiliate" that is a small business entity for that income year "connected" with an entity that is a small business entity for that income year, or 
• a partner in a partnership that is a small business entity for that income year. 

Based on legislation just passed this legislation is due to come into effect from 1 July 2016 and applies to all of the following situations: Transfers of depreciating assets. Where the balancing adjustment event arising from the transfer occurs on or after July 1 Transfers of trading stock or revenue assets. Where the transfer is after July 1 Transfers of CGT assets, where the CGT event from this transfer is after the same date.

Please contact us at Goodwin Chivas & Co if you have any queries.