Making sense of the menu of small business CGT concessions

The Federal Government announced proposed amendments limiting the application of the small business CGT concessions in the 2017-18 Budget.

Earlier this year, Exposure Draft legislation and explanatory material was released by the Government, with the Bill passed by the House and currently before the Senate.

These proposed measures would reduce access to the small business CGT concessions for taxpayers disposing of ownership interests in companies and trusts significantly.

For a client looking to restructure or considering an exit through a business or share sale, the compliance costs and complexities associated with determining eligibility for those concessions are already high and, if passed, the proposed amendments to Div 152 will undoubtedly add to the existing complexity – and with retrospective effect.

At the 26th Noosa Tax Intensive in November, Leanne Connor, CTA, (WGC Business Advisors) presents the session ‘Making sense of the menu of small business CGT concessions’, where she will attempt to do just that.

We spoke to Leanne about some of the issues facing businesses and their advisers.

“My session will cover the menu of available small business CGT concessions, through the prism of a client looking at a business restructure or exit through a business or share sale.”

Leanne’s session will examine the small business CGT concessions in light of the proposed legislative changes, looking at how the choice of structure affects the availability of the concessions, and what some of the traps are.

“My plan is to re-familiarise delegates with the small CGT concessions available for a restructure or sale of a business, then look at the added complexities introduced with the proposed legislative changes, valuation considerations, and provide a comparison with the small business restructure rollover.

Leanne will also consider valuation issues and the implications of recent case law (including FCT v Miley) on the $6 million “maximum net asset value” test, where the requirement to satisfy the MNAV test, was tested and lost by the Commissioner before the Administrative Appeals Tribunal in Miley, and subsequently overturned in the Federal Court in FCT v Miley, which highlighted the importance of engaging a properly qualified valuer.

“Revisiting the small CGT concessions available and the associated tips and traps with its application will assist delegates to understand and mitigate the tax cost of either a planned business exit or as part of the implementation of a wider succession planning strategy” she said.

On day two of the Intensive, Emma Woolley, CTA, (Hall & Wilcox Lawyers) will run the workshop ‘(Re)structuring family businesses from cradle to grave’, drawing on some of the issues presented in Leanne’s session, as well as the plenary ‘Keeping the family business in the family’ presented by Jessica Pengelly, CTA, with commentary from Michael Butler, CTA (both of Finlaysons).

The case studies covered in the workshop will cover issues including a restructure pre-sale and “mid-life”, a sale with modelling scenarios including a Div 152 gain, and look at a lifetime inter-generational transfer of a privately held business. Covering passing control of family trusts, the workshop will also look at estate planning implications (equalisation, inter-family loans and other issues), and the effect of the death of key family business individuals on estate planning.

Emma told us “The workshop picks up the themes from the two plenaries looking at the CGT small business concessions and family succession issues, and applies them to scenarios many advisers have seen, or will see, in real-life practice. These are important issues to explore as a very large number of businesses in Australia are privately held or family held and a large proportion will face transition in the near future as the founders either pass away or wish to pass the baton to the next generation.”

Leanne Connor, CTA, is a Director of WGC Business Advisors Pty Ltd, a chartered accountancy firm specialising in taxation and strategic advice to SMEs and high net worth individuals. Leanne has over 30 years’ experience providing accounting, business advisory, strategic superannuation and taxation services. Her areas of expertise include tax and superannuation planning, business restructuring and understanding the fundamental issues relating to SMSFs, family trusts and private companies.

Emma Woolley, CTA, of Hall & Wilcox Lawyers has extensive experience in advising clients in estate planning and estate administration, trust establishment and ongoing administration, trust estate disputes, and structuring for succession of ownership and control of private and family businesses. She leads Hall & Wilcox Lawyers’ Private Client practice.

The 26th Noosa Tax Intensive takes place 15-16 November 2018 at the Sofitel Noosa Pacific Resort.

This year’s event focuses on your client’s growth journey, from getting it right from the outset, to capitalising on growth, and maintaining value. Find out more about the plenary sessions and workshops on our website.


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