Newsletter
September 2024 Newsletter
Small business restructure roll-over: tax relief for genuine business restructures
With the latest statistics showing a significant rise in liquidations and with the ATO’s focused efforts on debt collection, small businesses face significant financial pressures. However, the answer isn’t to evade responsibilities or take shortcuts – business restructuring has to be done properly and in compliance with the relevant laws. The small business restructure roll-over (SBRR) provides a legitimate, structured path for businesses to reorganise their operations, allowing them to better meet these challenges without prejudicing creditors or engaging in unethical practices.
To qualify for the SBRR, each party to the transfer must meet the small business entity definition. A small business entity is defined as an entity with an aggregated turnover of less than $10 million. This includes businesses that operate as a sole trader, partnership, company or trust, provided they meet the turnover threshold. Entities connected with or affiliated with a small business entity also fall under this definition.
The assets being transferred must be active assets, which include CGT assets, trading stock, revenue assets or depreciating assets. Non-active assets, such as loans to shareholders, are not eligible.
The transfer must be part of a genuine restructure of an ongoing business, not an artificial or inappropriately tax-driven scheme, and there must be no change in ultimate economic ownership of the transferred assets.
Opting for the SBRR has several tax implications:
- The transfer does not trigger an income tax liability at the time of the transfer.
- The transferor is deemed to have received an amount equal to the asset’s cost, and the transferee acquires the asset at this cost.
- Potential liabilities like GST or stamp duty must be considered, as they might still apply.
- The roll-over does not protect against the application of anti-avoidance rules, ensuring the transaction is not purely tax-motivated.
For CGT assets, the transferee must wait at least 12 months to claim the CGT discount on any subsequent sale, and pre-CGT assets retain their status. For trading stock, the roll-over cost is based on the transferor’s cost or value at the beginning of the income year. Depreciating assets allow the transferee to continue deducting the decline in value using the transferor’s method and effective life. Revenue assets are transferred without resulting in a profit or loss for the transferor.
Super guarantee a focus area for ATO business debt collection
The ATO has recently confirmed that collection of business debts – including debts relating to superannuation guarantee (SG), pay as you go (PAYG) withholding and GST – is among its key focus areas. This is a timely reminder for all businesses to ensure they’re meeting their obligations.
The most recent ATO statistics show that although 94% of employers are meeting their SG obligations without ATO intervention, the ATO still raised over $1 billion in SG charge liabilities in the 2022–2023 financial year.
To ensure your business doesn’t incur these extra liabilities, you must pay SG contributions for your employees and eligible contractors on time and to the correct funds. Some contracts and awards may require you to pay contributions more regularly than quarterly.
If you make contributions to a commercial “clearing house”, the contribution is considered to be paid when it’s received by the employee’s fund, not by the clearing house. However, if you use the ATO’s Small Business Superannuation Clearing House, the contribution is “paid” when received by that clearing house.
From 1 July 2026, employers will need to pay SG at the same time as salary and wages (commonly known as “payday super”).
If you miss a payment, taking action promptly is essential to accessing the ATO’s support services and minimising your exposure to penalties. You must lodge an SG charge statement with the ATO within one month of the missed quarterly due date. You can ask the ATO for an extension to the lodgement date, but you must do this before the due date.
You’ll also need to pay the SG charge. This charge is more than the amount of contributions you would have paid if you had paid them on time, and it’s not deductible. The charge is paid to the ATO, not your employee’s fund. General interest charge will accrue on any outstanding SG charge, and the ATO may also issue a director penalty notice if it remains unpaid.