Small Business Restructure Roll-over - $10m turnover test

The Government has confirmed that the proposed increase of the aggregated turnover threshold to $10 million applies to the Small Business Restructure Roll-over relief. More information on the operation and application of the Small Business Restructure Roll-over is available here.

As part of the 2016-17 Federal Budget, on 3 May 2016 the Government announced that it proposed to increase the aggregated turnover threshold for access to most small business tax concessions to $10 million. The announcement included a proviso that the $2 million threshold would be retained for the small business capital gains tax measures.

As a result of the announced exception for the CGT measures, there was some conjecture as to whether the Small Business Restructure Roll-over relief would be considered a CGT measure such that it was restricted by the $2 million threshold.

We had thought it was consistent with the operation of the Roll-over relief as a deferral of tax rather than an exemption from tax that it should benefit from the higher $10 million turnover test. Whilst there have been some comments that this would be the case, the position is now confirmed with the introduction of the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 into the House of Representatives on 1 September 2016.

In addition to the Small Business Restructure Roll-over, in the Explanatory Memorandum to the Bill, the Government has identified the following list of small business measures that will benefit from the new $10 million aggregated turnover test:

  • immediate deductibility for small business start-up expenses;
  • simpler depreciation rules;
  • simplified trading stock rules;
  • immediate deductions for certain prepaid business expenses;
  • accounting for goods and services tax (GST) on a cash basis;
  • annual apportionment of input tax credits for acquisitions and importations that are partly creditable;
  • paying GST by quarterly instalments;
  • fringe benefits tax (FBT) car‑parking exemption; and
  • Pay‑As‑You‑Go (PAYG) instalments based on gross domestic product (GDP)‑adjusted notional tax.

The small business income tax offset is not included in the list above. A modified aggregated turnover test of $5 million applies for the offset. The small business CGT concessions in Division 152 are unchanged and retain the $2 million aggregated turnover or $6 million net asset test thresholds.

If passed by Parliament, the amendments to the turnover threshold will apply to the Small Business Restructure Roll-over relief as from its commencement on 1 July.

To discuss this further or for more information please contact:

Daniel Smedley
Sladen Legal
+61 3 9611 0105

Kristy Merganovski
Sladen Legal
+61 3 9611 0116

Dean Beaumont
Sladen Legal
+61 3 9611 0131