• Anti-avoidance

Restrictions to Small Business CGT Concessions

The Federal Government will tighten the accessibility to the small business Capital Gains Tax (CGT) concessions by limiting the assets eligible for the concessions. It has been proposed that eligibility for the concessions will be denied for assets unrelated to small business from 1 July 2017.

Under the current law, small business taxpayers can access certain concessions which provide them with various relief on capital gains derived on CGT assets that are used in their business. The concessions are in place to assist small business taxpayers in re-investing, and to allow these small businesses to further grow. Currently, it is the view that some taxpayers are accessing these concessions for assets which are not related to the taxpayer’s small business. Further, it is believed that some taxpayers are ‘arranging their affairs so that their ownership interests in larger businesses do not count towards the tests for determining eligibility for the concessions’.

The Federal Government has proposed that access to the small business CGT concessions will be tightened from 1 July 2017. This is an integrity measure, and will aim to stop taxpayers manipulating their affairs to allow access to the concessions in inappropriate circumstances.

BDO Comment

Little detail has been released by the Government in relation to this measure. It is undoubtedly the case that the provisions, as currently drafted, may allow access to the concessions in inappropriate circumstances. However, the Government will need to ensure that its amendments do not over-reach and deny access to the concessions to those who should properly be entitled to them.