Overview
In the current economic landscape, business owners may be considering a restructure, merger, or demerger to adapt, survive, or enable growth. A change in the structure of a business typically involves either the transfer of ownership interests in the entire business or of specific assets of the business. The disposal of an ownership interest in a business or its assets may trigger tax consequences for the business or business owners on capital or revenue account.
The distinction between capital and revenue is important to confirm as part of a restructure as significant tax concessions apply to capital assets including roll-over relief which is the focus of this paper. It is therefore imperative prior to looking into the roll-over relief provisions to confirm the asset or assets in question are indeed capital assets (or the roll-over is one that can apply to assets held on revenue account).
The general capital gains tax (CGT) provisions are in Part 3-1 and Part 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997). The roll-over relief provisions provide taxpayers with the ability to disregard certain capital gains or capital losses that arise from the disposal of CGT assets where the criteria for the relevant roll-over are met. These provisions are an area of great complexity and ones that are subject to continual change whether legislative, judicial, or administrative.
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