Eligible small businesses can now restructure from trading discretionary trusts to trading companies and are now able to access a stamp duty exemption in Queensland. The relief granted by the new legislation allows flexibility for businesses with less than $5 million turnover to assist management of current or expected compliance issues.
Trust structures are useful to provide asset protection and income flexibility. However, meeting regulatory financial requirements (eg. QBCC license) or banking covenants is where many business owners face issues under a trust structure.
Unlike a company, a trust cannot retain profits for expansion without being subjected to the highest marginal rates of tax. Division 7A and/or Unpaid Present Entitlement (UPE) compliance is another frequent predicament of business owners due to profits being distributed to a company but the cash remaining in the trust/business.
The trust structure can also impose limitations to the growth of a business, given that the inclusion of new business partners requires a restructure, most commonly to a company where shares can be issued.
Is Your Business Eligible?
Your business might be eligible for the Stamp Duty Relief in Queensland, if:
- Your turnover is less than $ 5 million, or your small business property equals this value criterion;
- You operate or are located in Queensland;
- The trust asset being transferred has a value of no more than $10 million;
- The new trading company is newly registered or has been dormant since registration;
- The shareholder of the new company is an eligible ‘beneficiary’ of the current trading trust.
Aspects to consider before restructuring:
- The capital gains tax consequences and if tax rollovers or concessions are available;
- The possible administrative burden of restructuring (e.g. new ABN, employment contracts);
- Historical tax cost and business value.
Ultimately, a thorough review of your affairs is vital when deciding whether or not a restructure is the appropriate strategy for your business. Our experienced team of accountants can help you make the best decision for your business success.
Contact us today by calling (07)3394 2311 or clicking ‘Contact Us’.