On 20 September 2017, the Senate passed the Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018 (the Bill). The Bill reduces access to the small business capital gains tax (CGT) concessions for taxpayers disposing of ownership interests in companies and trusts. The Government announced these “integrity improvements” to the small business CGT concessions in the 2017 Budget.

Prior to being passed by the Senate, the Bill was amended in respect of its date of effect.  As proposed by Senator David Leyonhjelm of the Liberal Democratic Party (as discussed in our earlier snippet here), the amendments in the Bill now apply in relation to CGT events happening on or after 8 February 2018 (when the Bill was released in Exposure Draft form) rather than 1 July 2017 (as originally announced in the May 2017 Budget).

The amendments include additional basic conditions that must be satisfied for a taxpayer to apply the small business CGT concessions to a capital gain arising in relation to a share in a company or an interest in a trust (the object entity). We previously reported on the Exposure Draft legislation here.

The Bill included two changes from those in the Exposure Draft:

• the object entity is no longer required to have carried on a business just prior to the CGT Event; and

• the Bill also introduces an integrity measure in respect of when cash and financial instruments are regarded as active assets. Where cash and financial instruments are acquired or held for the purposes of ensuring the entity satisfies the additional basic conditions, the cash and financial instruments are disregarded for the purpose of determining if the ownership interest satisfies the active asset test.

The removal of the retrospective – back to 1 July 2017 - effect of the changes will be welcome to taxpayers and their advisors, particularly those looking to utilise the small business CGT concessions in respect of transactions after 1 July 2017 but before the substantive detail of the changes were known on 8 February 2018.

The Bill now awaits Royal Assent (which we expect will occur).

To discuss this further or for more information please contact:

Kristy Merganovski
Associate
Sladen Legal
+61 3 9611 0116
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: kmerganovski@sladen.com.au

Daniel Smedley
Principal | Accredited Specialist in Tax Law
Sladen Legal
M +61 411 319 327 |  T +61 3 9611 0105
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia  
E: dsmedley@sladen.com.au 

Neil Brydges
Special Counsel | Accredited specialist in Tax Law
Sladen Legal
M +61 407 821 157 | T +61 3 9611 0176
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia  
E: nbrydges@sladen.com.au

Sam Campbell
Associate | Business Law
Sladen Legal
M +61 423 515 454 | T +61 3 9611 0135
Level 5, 707 Collins Street, Melbourne, 3008, Victoria, Australia
E: scampbell@sladen.com.au