The Queensland State Government has recently announced a potentially significant stamp duty exemption for small business restructures.
Often, people going into business for the first time may set up as a sole trader, partnership or family trust. As the business grows this structure may no longer be the best option, particularly with small business company tax rates reducing to 25% from next financial year. In the past, it has been a potentially costly and complicated process to transfer business assets out of these structures and into a company.
The above concessions significantly simplify this process and remove the potentially costly stamp duty impost. Here is a summary of the new concessions:
- The business assets being transferred must have a value of less than $10m.
- The transferring entity must have a turnover of less than $5m.
- The concession applies to all business asset including commercial property, but not residential property.
- The transferee entity must be a company that has not traded before (i.e. a newly incorporated company).
- Underlying ownership of the recipient company immediately after the transfer must be the same as the previous ownership.
The above concessions now provide significant flexibility for businesses currently operating as a sole trader, partnership or trust structure to “rollover” into a company structure. This can have a number of benefits including:
- Potentially lower tax rate.
- Enabling outside investor shareholders.
- Ability to retain profits in order to fund growth.
- Provide asset protection.
- Simplify the business structure.
It is important to note that the legislation to implement these changes have not yet been passed by the Queensland Parliament, however will have retrospective effect from 7th September 2020. It is possible that there may be some minor changes to the above eligibility requirements so we recommend that you contact us before proceeding with any restructure.
Please contact the team at MGI South Queensland if you wish to discuss your personal circumstances.