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Small business concessions under the spotlight

The CGT concessions for small business are important for qualifying businesses in that they can defer, reduce or remove liability to CGT.

The government announced last year that it intended to tighten the eligibility factors for the CGT concessions that are generally available to small businesses, and it has just initiated the formal review of the concessions.

Chaired by Dr Mark Pizzacalla from the Board of Taxation, the review is being conducted independently and is “self-initiated”. Dubbed a “consultation guide”, the Board of Taxation says it will draw on previous work it has undertaken into small business tax, other similar work undertaken by Treasury, as well as international experiences. (Get a copy of the guide here.)

In addition, a reference group of small business, professional and academic stakeholders have also generously volunteered their time and expertise to assist Dr Pizzacalla with his review. The results of the consultation process should be available by the end of October this year.

The concessions for small businesses are many and varied, and include lower tax rates, the CGT concessions as mentioned, the $20,000 instant asset write-off (which has been extended for a year but will revert to $1,000 if nothing changes), simplified trading stock rules and more.

There are other incentives for the small business sector, such as “early-stage” innovation company investors getting a tax offset of 20%.

Of course one of the bugbears for many in the small business arena is the inconsistent definition of what constitutes the true definition of a small business for tax purposes. Dr Pizzacalla confirmed on a LinkedIn thread that this is indeed one of the key consultation questions that the review intends to answer. The core questions before the review are stated as:

  1. What tax issues are of particular concern for small businesses?
  2. What do you regard as the most useful or effective small business tax concessions? Why?
  3. What opportunities do you see for improving existing small business concessions?
  4. Which current small business concessions are not working and/or should be removed? Why?
  5. What ideas do you have for new concessions that could help small businesses?

The Board of Taxation will also be holding public forums/meetings to get further engagement with the small business community as well as advisers to small business. Refer to www.taxboard.gov.au for times and locations.

Harper Group Pty Ltd Chartered Accountants Frankston Ph 9770 1547

Disclaimer: All information provided in this article is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.

Michael Sinclair