As part of reforms previously announced in the budget, which include what the government has labelled its ‘tax integrity’ reforms, small business CGT concessions would be restricted to assets used, or ownership interests, in a small business.
The change would be retrospectively applied from 1 July 2017, meaning many SME owners who had been counting on the concessions in the current financial year would receive a nasty surprise come tax time.
“This is an integrity rule designed to prevent taxpayers from accessing these concessions for assets which are unrelated to their small business, such as by arranging their affairs so that their ownership interests in larger businesses do not count towards the tests for determining eligibility for the concessions,” Mr Morrison said in a statement.
Despite Mr Morrison claiming that the government is “committed to supporting small businesses and helping them invest and grow”, BDO tax partner Mark Molesworth slammed the move as a restrictive burden on SMEs that would ultimately deny concessions for legitimate claims.
Speaking with My Business’ sister publication Accountants Daily, Mr Molesworth claimed that should the draft legislation take effect, it would “significantly reduce the circumstances in which taxpayers can claim the small business CGT concessions”.
“While these are badged as integrity measures, the proposed law does more than just limit abusive arrangements — it removes the concessions from ‘plain vanilla’ circumstances that were clearly meant to be captured by the existing provisions,” he said.
“The drastic increase in scope, which was not flagged in the budget announcements, means that the proposed provisions are retrospective and will adversely affect taxpayers who have sold shares in companies or interests in trusts since 1 July 2017 in reliance on the existing law and the plain meaning of the budget announcement.”