The current economic downturn is a golden taxation opportunity
for businesses considering a restructure.
Operating a business through the right structure is essential
for many reasons, including asset protection, distribution
flexibility and capital gains tax concessions that apply to a
Many businesses are established using the wrong structure.
Historically, businesses that have been operating for many years
have been reluctant to restructure. Changing structures can trigger
stamp duty and capital gains tax liabilities.
Current low asset prices may significantly reduce the stamp duty
and capital gains tax liabilities otherwise payable for businesses
that restructure now.
A relatively low stamp duty and capital gains tax liability now
may reap huge rewards in the future if a new structure offers
greater tax concessions. Furthermore, some restructures need to be
implemented more than 12 months before a sale to ensure that
capital gains tax concessions are available.
Consider the following example:
Charlie incorporated a company, XYZ Pty Ltd to buy a new
business for $200,000 three years ago. Earlier this year the value
of the business had increased to $400,000. Had XYZ Pty Ltd sold the
business and paid the proceeds to Charlie, tax of approximately
$93,000 would have been payable based on a top marginal tax rate of
The economic downturn has now seen the value of the business
reduce to $200,000 again. XYZ Pty Ltd transfers the business to the
XYZ Trust and pays no capital gains tax. If XYZ Trust were to sell
the business in two years for say $400,000 it could take advantage
of the 50% concession from capital gains tax available to trusts
and individuals that have held assets for more than 12 months.
Charlie's tax bill on a sale of the business would also be
halved to $46,500 (23.25% of $200,000).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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