CA ANZ wrote to the federal government regarding the exposure draft of the Treasury Laws Amendment Bill 2018: improving the small business capital gains tax (CGT) concessions. You can read about the changes in more detail here.
In the 2017 federal budget, the government announced that it would amend the small business CGT concessions with effect from 1 July 2017, with a view to only allow concessions to be accessed in relation to assets used in a small business or ownership interests in a small business.
Effectively, the proposed measures move to deny access to the concessions for assets which are unrelated to a taxpayer’s small business. For example, some taxpayers were arranging their affairs so that their ownership interests in larger businesses did not count towards the tests for determining eligibility for the concessions.
Although the spirit of the changes are not necessarily problematic, CA ANZ argues the “extraordinarily complex” changes go beyond what taxpayers could reasonably have expected from the budget announcement.
The lack of clarity from the government on this issue could adversely affect taxpayers who have set out to do the right thing, CA ANZ said.
“Taxpayers have in good faith sold, or entered into agreements to sell, interests in entities on the basis that they qualified for the concessions but will not now do so. If this had been known before the sale had concluded and/or terms of agreement had been reached, the structure of the transaction and/or price negotiations may have been different,” CA ANZ said.
“In some cases there will be adverse flow on consequences arising from a sale, e.g. where sale proceeds have been locked away in superannuation. Should the changes apply from 1 July 2017 any adverse flow on consequences should be identified and addressed,” CA ANZ said.
CA ANZ believes the integrity measures could be better implemented by more a broader and more consultative approach to reform.
“In our view, the small business CGT concessions need to be reviewed holistically from a policy perspective to ensure that they are appropriate, fit for purpose and are meeting their objectives,” CA ANZ said.
“To the extent that the exposure draft changes fundamental design principles of the concessions, it would have been preferable for this to have been done through a holistic, public and transparent consultation process rather than an exposure draft containing complex changes with a short consultation period,” CA ANZ added.