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Business Succession: Has COVID-19 reduced your turnover to less than $10 million?

If you own or operate a small business, and COVID-19 has impacted your annual turnover to be less than $10 million per year, then you may be able to restructure your business as part of a capital gains tax rollover concessions.

The Australian Taxation Office offers a concession to small businesses transferring active assets from one entity (the transferor) to one or more other entities (transferees) without incurring a tax liability if it is part of a genuine restructure.

The rollover applies to the genuine transfer of active assets that are assets subject to capital gains tax (CGT) including, trading stock, revenue assets or depreciating assets.

The eligible business structures for which the rollover concessions may apply are:

  • a small business entity.
  • an entity that has an affiliate that is a small business entity.
  • an entity that is connected with a small business entity.
  • a partner in a partnership that is a small business entity.

The key components to ensure the transaction is eligible are:

  • must be part of a genuine restructure;
  • there must be no change to ultimate economic ownership – this means there must not be a change in the individual or individuals who own (directly or indirectly) the assets of the business; and
  • the business must hold assets eligible to be transferred.

Given the current economic climate, it may be an appropriate time to discuss with your accountant and solicitor whether this restructure may apply or be beneficial to your business.

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