While the federal government estimates that SMEs could achieve approximately $20 million per annum in tax savings when the new legislation comes into effect, William Buck believes the overall cost savings for SMEs will be much higher “when reductions on general restructure costs, such as advisers' fees and valuation costs, are also factored in".
The firm said in a statement: "In addition, stamp duty on NSW business transfers is also legislated to be abolished from 1 July 2016. If this duty abolition also proceeds, restructures will be a more realistic alternative for businesses."
According to Todd Want, tax director at William Buck, these changes have the potential to save SMEs millions of dollars every year on their tax bills.
“Business owners who set up their operations on a limited budget and didn’t seek appropriate advice for their initial structure are set to be the big winners from the government’s new changes,” he said.
“If these changes make restructuring easier and cheaper, we expect that the savings from these proposed measures will be used by many SMEs to grow their businesses, which in turn will assist economic growth.”
Mr Want said there are also potential benefits for family businesses looking at succession planning.
“The ability to move from a sole trader or company structure to a family trust has been challenging in the past because it can trigger significant tax issues and restructure costs. The proposed changes could overcome this by allowing families to more easily and cost effectively move their business to a flexible structure, such as a family trust.”
He added: “This could allow one generation to pass the business onto the next generation when the time is right for the family, and not be constrained because the tax costs would otherwise be too high."
However, despite the significant advantages that small businesses could achieve from these measures, business owners need to pay careful attention to the hidden costs that are associated with changing their structure, according to Mr Want. While the new tax changes could be a way to save money on a restructure now, Mr Want said it is important that business owners think about the impact the restructure will have on their exit plans.
“The measures may allow a business to restructure from a sole trader to a company without triggering any tax now; however, the tax payable when the business is eventually sold could be significantly higher under the new structure if it is not carefully planned. It is important to think about the future tax impact and not just the potential savings now," he explained.