Starting 1 July 2016 it’s never been a better time for a small business to change their legal structure! From this date companies classified as small business entities (with revenues less than $2million) will be able to change legal structures without incurring income taxes.
It’s not unusual for a business to start out with a simple, low cost structure and then find they need to transition to a more complex structure as their business expands. The tricky thing has always been managing the change of structure without incurring an unexpected tax liability. Things are about to get easier.
There are strict guidelines around who these new rules will apply to and under what circumstances.
All parties to the transfer must be classified as small business entities, and meet the ATO’s residency requirements. The transfer must be seen as part of a genuine restructure, and there must be no change to the ultimate economic ownership.
If you have been thinking about changing business structure please get in touch so we can have everything prepared for 1 July. (It’s always best to rollover at the beginning of a new financial year.)
If you aren’t sure whether you need to transition to a new structure, then check out our article Is It Time to Change Your Business Structure?