Tax Hot Spots

Coming into the new Financial year, there are a number of changes that businesses should be aware of:

Small Business Restructure Rollover
From 1st July 2016, the Federal government has passed the Small Business Restructure Rollover.  This rollover allows a small business to change structures and defer all gains or losses on Capital Gains Tax (CGT) assets, trading stock, revenue assets and depreciating assets, as part of a genuine restructure of an ongoing business. This rollover extends and improves on previous rollovers which tended to focus only on the CGT assets with additional hurdles to allow for non CGT assets and the deferral of gains and losses.

CGT Withholding Regime
The CGT Withholding Regime applies from 1st July 2016 and, whilst initially targeted at foreign residents, it applies equally to Australians.  This will require all purchasers of land to withhold 10% of the purchase price on account of the vendor's potential capital gain and remit this to the ATO.  This 10% withholding is required if the market value of the asset is greater than $2M so will exclude the majority of residential sales, however will have impacts on finance and cashflow for vendors and bank loans.  A vendor is able to apply to the ATO beforehand for a document that will allow for the 10% to be paid to the vendor, not the ATO, if certain conditions are satisfied.

Treatment of Corporate Losses
The ability to claim tax losses is set to become easier as the “same business test” is becoming more flexible and more like a predominantly similar business test, unlike the prior test which required it to be virtually identical.  For example, if a company with losses was sold to a purchaser, previously that purchaser would have to carry on business in the same fashion and same manner as the previous owners, even if carrying on business like that is the reason it was losing money.  This change will now allow the purchaser to keep what is essentially the same business, but make changes and improvements to become a profitable business and also enjoy the tax losses to reduce any future taxable income.  The issue is that the new rules only apply to losses made in the current and future years and consideration of when the losses incurred is essential.

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