Small business retirement exemption under threat
A proposed change to div 152 ITAA 1997 may severely limit the ability to make contributions into super under the CGT small business concessions where business real property is held in a safe harbour entity, warns an industry lawyer.
Speaking at an event, DBA Lawyers director Daniel Butler said as part of its tax integrity package, the government is planning to amend the tax law so that taxpayers will only be able to access the small business CGT concessions in respect of assets that are used in a small business, of which represent an ownership interest in the small business.
This could severely impact small business owners however, given that many of them hold property such as trademarks and business real property in a safe harbour entity, outside of the operating entity in order to keep it safe, Mr Butler explained.
Under the current law, where an asset such as business real property is held in a safe entity, it’s still considered to be an active asset by virtue of the fact that it’s used in a connected entity’s business, he said.
However, if the proposed change goes ahead, assets held in this safe harbour entity will no longer be eligible for the small business concessions.
“Unless the business real property is held in the business entity, there will be no CGT relief under div 152 for the business real property,” he said.
“If passed, this will adversely impact many SMEs and farmers. It is a major change that will also catch many unsuspecting advisers and taxpayers out.”
Mr Butler said there would not be any grandfathering for existing business assets and that any capital gain that occurs will be subject to the rules that exist at the time.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.