In good news for Queensland small businesses, changes to stamp duty laws enable mum and dad type businesses to restructure with a full or partial duty exemption when transferring assets.
This represents the removal of an enormous cost obstacle for evolving businesses that will allow them to restructure and take advantage of a significantly reduced tax rate while opening up a raft of other opportunities that can aid future growth and expansion. Read on to learn why now is the time to restructure your small business entity…
For certain small business entities including sole traders, partnerships and trading trusts, transferring business assets to a company structure simply makes sense. Especially if you’ve been paying tax on your business earnings at your personal marginal tax rate which can be as much as 47%.
While the much lower corporate tax rate of 26% is the most obvious advantage of restructuring to a company structure, others include the important risk benefit of limited liability for shareholders, opportunity to retain income-splitting between eligible family members for collectively reducing tax payable, better management of losses, and tax effective extraction of wealth from the business.
A company structure provides significant transaction efficiency should the business owners wish to introduce an additional partner, sell the business or implement a succession plan for future transfer of ownership.
Legally these types of arrangements are fraught without a corporate structure, as parties considering buying into the business would need to agree to personally take responsibility for the business risks.
When it comes to accessing finance for the business to expand or for parties to buy in to the business, banks and lenders will favour corporatised business structures.
Put simply, family businesses that are not structured as a corporate entity will present risks that will turn many investors and buyers away.
Now that CGT small business restructure concessions are more aligned with the Qld stamp duty concessions, there is no longer significant obstacles to accessing the benefits of trading through a corporate structure. Following a year of disruption for many businesses, now is the time to take advantage of these new provisions that will allow growing (or recovering) businesses to get their house in order without incurring significant regulatory costs.
To apply for the exemption, businesses must have an annual turnover of less than $5 million and must conduct business in Queensland. Further, the exemption only applies if business assets and property (including motor vehicles but not including residential property) transferred into the new structure are less than $10 million.
For more information about the benefits of corporatising your business structure to make a positive difference in your future success, please email [email protected] or [email protected] or call 07 3217 5700 to talk to a member of the P+Y team.
P+Y Accountants and Business Advisors are known for expanding the possibilities for professionals and enterprising business owners.
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