Thanks to new amendments and legislation passed in October 2022, Queensland small businesses looking to restructure by transferring assets from a sole trader, partnership or discretionary trust structure to a company structure can continue to access either a full or partial duty exemption on the transfer.
This makes business restructures not so taxing on business owners saving them thousands in transfer duty.
Transfer duty – in general
Traditionally, small business restructures were liable to pay transfer duty to reorganise their entities and assets. In Queensland, transfer duty is currently calculated on a sliding scale of up to 5.75% where there is a dutiable transaction of Queensland dutiable property. The most common transaction being a transfer or an agreement to transfer dutiable property.
The most well-known example of dutiable property in Queensland is land or interests in land, i.e., leases. However, in Queensland other items of property is still dutiable including goodwill, intellectual property, debtors of a Queensland business, work in progress, business names and licences, supply rights and general business assets.
Exemption of transfer duty (and CGT)
In 2020, Public Ruling provided the Commissioner with power to broaden the exemptions for corporate restructures extending them to provide an exemption from transfer duty for transfers of small business property (including motor vehicles) that are undertaken as part of an eligible restructure of small business entities.
In the event a restructure triggers CGT, we may also be able to apply for small business capital gains tax concessions. This will eliminate another tax to be paid saving even more of your hard-earned cash going to the ATO.
You must gain advice before you restructure
Every structure has its pros and cons and it is imperative that you understand how that will affect you and the way in which you operate your business and hold your business assets.
There are several factors that need to be considered when establishing a structure for your business and personal affairs, and obtaining professional advice is vital in understanding your own personal circumstances.
Before establishing any structure or actioning a restructure, we highly recommend seeking professional advice.