Significant changes to small business concessions flagged

February 2020

The Government has released the Board of Taxation's report into the concessions that are available to small business. The report contains a number of recommendations aimed at improving the tax landscape for small business taxpayers. 

Small business owners are set to be impacted by a number of changes to small business concessions, with the major recommendation by the Board is the simplification of the definition of 'small business entity' so that a $10 million turnover threshold would apply across all tax concessions for small business (i.e., adjusting the different thresholds that currently apply to the CGT concessions and small business tax offset).

What else is changing?

In conjunction with this recommendation, the Board proposes significant changes to the small business CGT concessions including:

  • The removal of the $6m maximum net asset value test and 
  • Combining the four different CGT concessions into one exemption with a lifetime cap.
  • Replacing the small business tax offset with a different concession or increasing the cap on the offset to make it a more meaningful concession. 

The review also contains a number of other recommendations aimed at simplifying the concessions, expanding access to some concessions and removing others. These include: 

  • Re-introducing the loss carry back rules for small business companies;
  • Increasing access to the instant asset write-off for entities not using the pooling rules;
  • Apply one rate (30%) to small business general pools;
  • Repealing the simplified trading stock provisions; and
  • Allowing small businesses to calculate PAYG obligations using real-time figures.

Complexity and eligibility requirements the drivers of change

A consistent theme by the Board's review was the complexity of the concessions available and the wide range of eligibility requirements. Review submissions received pointed to the difficulty of applying the small business CGT concessions in practice and the need for SMEs to engage high-cost specialist advice. Simplifying these rules was therefore a key focus.

It will be interesting to see how many of the Board's proposals are adopted by the Government.

As yet the recommendations are still at early stages. For more information, please contact us on 02 9957 4033.

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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