21st March 2018

    Small Business CGT Concessions integrity provisions

    In the 2017-18 Budget as part of its tax integrity package, the Government announced that, from 1 July 2017, the tax law will be amended so that a taxpayer will only be able to access the small business CGT concessions in respect of assets that are used in a small business, or which represent an ownership interest in the small business.

     The Government released exposure draft legislation on 8 February 2018 which contains numerous unexpected substantive law changes which are intended to operate retrospectively from 1 July 2017, including: 

    • where the CGT event is the sale of interest in a company or trust (object entity), the object entity must be carrying on a business just before the CGT Event
    • cash at bank used in the business is now excluded from being an active asset for the purpose of the 80% look through test, and
    • the object entity itself must be a CGT small business entity or would itself satisfy the $6m maximum net asset value test

    PVW Partners took the opportunity to respond to Treasury’s request for feedback and lodged a submission expressing our concerns with the draft legislation.

     At its core we are making the case that the announced changes have gone beyond the changes suggested at a high level in the 2017-18 Federal Budget and that, in combination with what is tantamount to their retrospective implementation, it is unfortunate policy implementation. We’ve also suggested that due to the high proportion of small businesses in our regional economy these changes will have an inequitably large impact in regional Australia and thus from a public policy perspective should be reconsidered.

     Please contact us if you have any concerns or would like to discuss any of the proposed changes further.

    A copy of the submission, which includes a technical discussion of the proposed changes, can be found here.

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