As announced by Queensland Treasurer Cameron Dick on 7 September 2020, the Queensland Office of State Revenue has released a new public ruling (Ruling) which introduces an administrative arrangement that provides an exemption from duty on certain small business restructures.
What are small business structures?
Effectively, the exemption set out in the Public Ruling aims to assist businesses currently trading through small business structures such as
- Sole Traders
- Discretionary Trusts
A business owner can use the exemption to corporatize their business to a new company structure.
Transfer duty – in general
Traditionally, small business restructures were liable to pay transfer duty to reorganise their entities and assets. Transfer duty in Queensland 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, on which duty has gradually been abolished in some other jurisdictions, 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.
The recently released Public Ruling provides 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.
Eligibility for exemption
For the exemption to apply, the small business entity must carry on a business in Queensland (i.e. providing goods or services to Queensland customers) and have an annual turnover of less than $5,000,000.
While the Public Ruling does not specify the turnover test any further, it is likely that it will be applied for the preceding 12 months to the proposed transfer of small business assets.
When will the exemption apply?
As part of a small business restructure involving the transfer of small business property, the exemption will apply when the property is transferred from the small business entity to a newly registered unlisted corporation (or an unlisted corporation that has been dormant since its registration) of which the individual is a shareholder, and where all the partners of the partnership, or all beneficiaries of the discretionary trust, are shareholders of the new company.
Once legislated, this ruling may assist those currently operating under small business structures with the expansion of their business, succession planning, or simply to gain access to a broader range of tax benefits moving forward; including the new small business corporate tax rate of 26%.
How can Walsh help you?
There are a number of factors that need to be considered when establishing a structure for your business/affairs and obtaining professional advice is vital in understanding your own particular circumstances.
If you would like to understand how you can capitalize on this new initiative and improve your business structure and take advantage of the stamp duty exemption, contact our Business and Entrepreneurial Support team today.