CGT changes for partners
The small business capital gains tax (CGT) concessions for partners in partnerships will be eliminated in certain circumstances.
Partners in a partnership have the ability to transfer the rights to their future income from the partnership to other entities, effectively reducing the income tax liability of the partner assigning the right. The assignment would usually be to a lower tax paying entity. When these rights are assigned, the small business CGT concessions would typically be available to reduce the capital gain on the disposal. This will no longer be possible under the proposed measure.
There are no amendments to the concessions themselves. Eligible small businesses will continue to have access to the concessions.
This measure appears to be directed at large professional partnerships seeking to manipulate the concessions that are otherwise intended to reduce the tax burden for genuine small businesses. BDO expects to see legal, accounting, engineering, medical and other professional firms to be under increased scrutiny and investigation by the ATO in relation to their tax affairs.