Small Business CGT concessions

The Government announced changes that will effect eligibility to the small business CGT concessions for CGT events happening after 7:30pm (AEST) on 10 May 2011.

The changes are designed to ensure that trusts will not be able to avoid being treated as connected entities for the purposes of testing eligibility for the CGT small business concessions.

There have been arguments in the past that as trusts do not own assets for their own benefit, the value of assets held in trusts do not need to be taken into account when testing eligibility under the relevant thresholds for the small business CGT concessions.

The budget papers suggest that the changes will also ensure that assets held by some small businesses that have not qualified previously will now be active assets for the purposes of the concessions.

Entrepreneurs Tax Offset replaced with Small Business “Instant” Write-Off for Motor Vehicles

The Government will introduce a tax write-off for the first $5,000 of any motor vehicle purchased by a small business from 1 July 2012.  The write-off replaces the Entrepreneurs Tax Offset (ETO) incentive arrangements.  The new measure will provide the following:

• An “instant” write-off of the first $5,000 of the purchase value of any motor vehicle;
• The ability to transfer the balance of the purchase value to the general small business depreciation pool (15% depreciation in year 1; 30% depreciation in subsequent years).

The Treasurer’s Press Release on the measure states that the write-off is available to all small businesses.  Eligible small business entities will include sole traders, trusts, partnerships and companies.