Tax practitioners have been urged to methodically scope through different aspects of a client’s business when determining the application of the small business CGT concessions to stay on the right side of ATO scrutiny.
Methodical care needed with small biz CGT concessions: Tax expert
Tax Partner principal Tom Delany said that despite the expectation and pressure from small business clients to obtain the CGT concessions, practitioners needed to pay attention to even the most basic conditions.
“There is a disadvantage we face because clients are expecting that they'll get the small business CGT concessions because their mates have got it and he has a similar business – the fact that he operated in a different structure they may not know that,” said Mr Delany at the IPA’s National Congress in Sydney,
“When we're testing the basic conditions for the small business CGT concessions we've got to do them essentially methodically.
“The ATO do a lot of work in confirming that they satisfy the criteria, they are going to check if you have got everything, even the most basic things.
“With a lot of compliance work that we do, essentially we're just doing tax returns for a company or trust – we're not necessarily developing any new positions but in the context of a small business concession, if we're saving someone $1.7 million, we really need to put work into that.”
Further, Mr Delany said practitioners had to pay close attention to new additional conditions applicable to CGT events after 8 February 2018, after legislation was passed in September.
“This is an additional complexity … It gets your taxpayer to step into the object entity and essentially satisfy the rules that previously were satisfied at that level of remoteness,” he said.
BDO partner Mark Molesworth had earlier noted that the new measures would affect those with legitimate and simple arrangements.
“The proposed provisions will significantly reduce the circumstances in which taxpayers can claim the small business CGT concessions,” Mr Molesworth told Accountants Daily.
“While these are badged as integrity measures, the proposed law does more than just limit abusive arrangements — it removes the concessions from ‘plain vanilla’ circumstances that were clearly meant to be captured by the existing provisions.”