Commonwealth revenue measures introduced into Parliament or registered as legislative instruments or regulations since our previous TaxTalk publication include the following:
Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016, introduced into the House of Representatives on 4 February 2016, proposes amendments to the Income Tax Assessment Act 1997 (ITAA 1997) to provide greater flexibility for small businesses to change their legal structure. The amendments are designed to make it easier for small business owners to restructure by allowing them to defer gains or losses that would otherwise be made from transferring business assets from one entity to another as part of a genuine restructure. The new optional rollover broadly applies where a resident ‘small business entity’ (refer Subdivision 328-C) transfers an ‘active asset’ of the business to another resident small business entity as part of a genuine business restructure, without changing the ultimate economic ownership of the asset. Whether a restructure is ‘genuine’ is a question of fact that is determined having regard to all of the facts and circumstances, but to provide certainty, a ‘safe harbour’ rule is included such that a small business will be taken to satisfy the requirement that the transaction is, or is a part of, a genuine restructure of an ongoing business where, for three years following the roll-over:
- there is no change in the ultimate economic ownership of any of the significant assets of PwC Page 8 the business (other than trading stock) that were transferred under the transaction
- those significant assets continue to be active assets; and
- there is no significant or material use of those significant assets for private purposes.
To be eligible for the roll-over, each party to the transfer must be either:
- a small business entity
- an entity that has an affiliate that is a small business entity
- connected with an entity that is a small business entity, or
- a partner in a partnership that is a small business entity
for the income year during which the transfer occurred.
The consequences of the rollover are broadly as follows:
- The income tax law will apply to the transferor as if the transfer takes place for the asset’s rollover cost. The roll-over cost is essentially the transferor’s cost of the asset for income tax purposes, such that the transfer would result in no gain or loss for the transferor.
- Where membership interests are issued in consideration for the transfer of a roll-over asset or assets, the cost base and reduced cost base of those new membership interests is worked out based on the sum of the roll-over costs and adjustable values of the roll-over assets, less any liabilities that the transferee undertakes to discharge in respect of those assets, divided by the number of new membership interests.
The amendments apply to transfers of depreciating assets where the balancing adjustment event arising from the transfer occurs on or after 1 July 2016; trading stock or revenue assets where the transfer occurs on or after 1 July 2016; and capital gains tax (CGT) assets where the CGT event arising from the transfer occurs on or after 1 July 2016.
Notice of Substituted Rates of Customs Duty For Excise-Equivalent Goods - Notice (No. 1) 2016 and Notice of Substituted Rates of Customs Duty For Excise-Equivalent Goods - Notice (No. 1) 2016, published on 1 February 2016, set out substituted rates of excise duty and customs duty (respectively) for certain goods from 1 February 2016
Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016, introduced into the House of Representatives on 10 February 2016, contains the following proposed measures:
- with effect from 1 July 2017, extend the goods and services tax (GST) to digital products and other services imported by consumers;
- amend the GST treatment of cross-border transactions between businesses; and
- reform the Farm Management Deposits (FMD) scheme for income years commencing on or after 1 July 2016 by:
- increasing the maximum amount that can be held in FMDs by a primary producer to $800,000
- allowing primary producers experiencing severe drought conditions to withdraw an amount that has been held in an FMD for less than 12 months, without affecting the income tax treatment of the FMD in the earlier income year, and
- allowing amounts held in an FMD to offset a loan or other debt (i.e. as a result of the arrangement a lower amount of interest is charged on the loan than would otherwise be the case) relating to the FMD owner’s primary production business.
For further information in relation to the GST measures see our GST Alert.
Tax Laws Amendment (Norfolk Island CGT Exemption) Bill 2016, introduced into the House of Representatives on 10 February 2016, proposes to exempt from CGT, assets that were acquired by Norfolk Island resident taxpayers before 24 October 2015. This amendment follows the enactment of legislation last year pursuant to which Australia’s income tax system, including CGT, will begin to fully apply to Norfolk Island from 1 July 2016. The exemption however will not apply to assets held by Norfolk Island residents that would not have been exempt from CGT before Norfolk Island was fully brought within Australia’s income tax system (such as assets on mainland Australia).