Why changing your business structure just got easier

Is your current business structure the right structure for you? New rules mean that small businesses can now restructure their business operations without triggering adverse tax implications.

Before the introduction of the new restructuring rules, if a business restructured from say, a partnership to a trust, there was a possibility that the change in structure could trigger capital gains tax (CGT).

While the existing CGT provisions already contain a number of roll-overs that can be utilised for business restructures, they generally only provide relief when assets are transferred to a company. This new form of roll-over relief can provide complete income tax relief when assets are transferred to a sole trader, partnership or trust – if certain conditions can be met.

Conditions for Accessing New Rules

The conditions for accessing these new rules are fairly strict – examples include, but not limited to:

  • The transaction must be a genuine restructure of an ongoing business;
  • Each of the parties to the transaction must be a small business entity (revenue under $2m);
  • The business owners and their share in those assets can’t materially change.

Why Restructure?

For many small business owners, the business structure they start with is not always the best structure over time. There are a lot of reasons why a business owner might need to restructure, such as:

  • For risk & asset protection
  • Tax purposes
  • Compliance reasons

Considerations when changing your business structure

If you are looking at changing your business structure, there are a few overarching principles you should think about, including:

  •  Keeping it simple
  • Thinking of the future
  • Starting with the end in mind
  • Commercial considerations
  • Separate the business activities from valuable assets
  • Protection of retained profits
  • Separate the risk between individuals
  • Corporate trustees for a trust
Would you like a review of your current business structure?
Or would like to learn more about the new CGT relief measures? 

Then please contact our office on 3286 1322 – we’ll be able to help you.