Last year, the government passed the Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018 which contained amendments to the ITAA 1997 to include additional conditions that must be satisfied to apply the small business CGT concessions to capital gains. The bill received royal assent on 3 October 2018, but the measures apply to CGT events occurring on or after 8 February 2018.
Insyt chief executive Darren Wynen said that from a superannuation perspective, the small business CGT concessions represent a good opportunity for business owners to get extra money into super through the CGT cap election.
However, in order to do this, Mr Wynen explained, they need to be eligible for one of the capital gains tax concessions.
“If you’ve got an individual selling shares in a company or units in a unit trust, they’ve now introduced rules that you need to pass as a shareholder which are really complex,” Mr Wynen explained.
“There are now 36 pieces of law that you need to work through in order to assess whether those shares can potentially qualify.”
Ahead of launching a new publication on the small business concessions this week, Mr Wynen said that these concessions are meant for small business, but these changes seem to be introducing “almost a ridiculous level of complexity for working out whether you can actually comply with the concessions”.
“I can understand that the government has got to balance the abuse of the concessions with people structuring their affairs to get their concessions on the sale of shares in a large company, but they’ve got to be counteracted with some common-sense law, and this legislation seems to be overly complex for small businesses,” he said.
“This area was already complicated enough, but now it has been further complicated and it just seems to be going too far in terms of the complexities that have now been introduced.”
If business owners are selling shares or units in a unit trust, he said, then they need to be aware that for CGT events that happened from 8 February 2018 onwards, there’s now a much more complicated set of steps they need to work through to determine whether they are eligible.
“There are 36 sub-sections, each with different definitions and other pieces of law that one needs to refer to just to get through one little part of the concessions,” he warned.
“It’s almost like they want people to trip up who are genuinely trying to satisfy these rules.”
The rules can be particularly complex where there are multiple entities in a structure, he said.
“I guess this is just another change in the whole series of changes that have been made ever since Peter Costello introduced these measures. Some of the changes certainly have been positive, but this one seems to go above and beyond [in terms of combatting] anti-avoidance,” he said.
“It seems to be complicated for the sake of being complicated, rather than good practical law that’s meant to assist small businesses and protect revenue at the same time.”
Yet another example of the rhetoric of this appalling government of intellectual midgets not matching reality.
Over Bloody Complicated ODwyer yet again. Another stupidly complex legislative bomb drops as she exits the pollie world. What a wrecking ball she has been to simpler Super.
It used to be these concessions were tacit recognition that small business owners often put their entire savings into growing their business at the expense of their own super. On retirement they have a nest egg to sell and this sees them into a comfortable retirement. The problems are twofold. The government has tightened the rules beyond reasonable, as outlined by Darren, and worse still, the economy is now so poor that businesses are either not selling or for such a low value that the owner would have been better off as en employee all those years given the increasing risks and complexities most business owners are faced with. Maybe the government should focus on who is running the business rather than who owns the shares? If business participation AND ownership are obvious, then the CGT concessions should apply? Very unfair legislation for the genuine business owners.