A re-elected Coalition Government would remove barriers that currently prevent thousands of SME owners from accessing capital gains tax concessions worth millions of dollars.
Under the proposed changes, SME owners will be able to claim the concessions when they sell an asset if their business has less than $2 million turnover per year, even if that asset is held in a separate business entity from the operating business entity.
Assets owned by a partner, but used in the business owned by the partnership, will also qualify for the small business CGT concession, provided that the partnership passes the $2 million revenue test.
The new test would operate alongside the existing net worth test, under which business assets held by a separate entity qualify for CGT concessions provided the business’s total assets are worth less than $6 million.
Qualifying for the small business CGT concession often means SME owners can avoid paying tax on millions of dollars in capital gains when they sell their business.
The changes could be worth an enormous amount to SMEs that previously may have struggled to access the concessions, according to Sue Prestney, SME spokeswoman for the Institute of Chartered Accountants in Australia and a principal of MGI Boyd Accountants.
Prestney says many SME owners fall through the cracks under the existing asset test, either because they own assets worth more than $6 million or were defeated by the sheer complexity of the test.
“Most people try and get their business premises in a different structure to their business for asset protection reasons, so it is very common, and these people would be able to access the more simple small business entity test,” Prestney says.
Taxation Institute of Australia president Peter Moltoni also welcomed the announcement. “These changes are particularly welcome because they recognise the underlying commercial rationale in the way taxpayers do their business,” he says.