Duty exemptions available for eligible small business restructures on “small business property”

Sole traders, partnerships and discretionary trusts that are “small business entities” can now transfer “small business property” to a newly registered company (or a company that has been dormant since its creation) without paying duty.

Broadly, the entity looking to restructure must:

• be an individual, partnership or discretionary trust (notably, not a unit trust);
• carry on its business in Queensland (and/or provides goods or services to customers in Queensland); and
• have an annual turnover of not more than $5 million.

Applying the new exemptions

The exemption will then apply to a restructure if:

• small business property is transferred from the relevant small business entity to a newly registered company (or a dormant company that meets certain additional requirements);
• the small business property being transferred has a maximum dutiable value of $10,000,000;
• the individual is a shareholder, or all the partners of the partnership are shareholders, or all the beneficiaries of a discretionary trust are shareholders, of the company; and
• the asset is not a home used for residential purposes (to clarify, a home used partly for a business will not be eligible for the exemption).

Once these requirements are satisfied, the exemption will be applied to the lesser of:

• the interest of the individual, the interest of the partners in the partnership, or the interest of the beneficiary trust’s interest in the small business property immediately before it was transferred; or
• the interest of the individual, the partners, or the beneficiary trust’s interest in the small business property immediately after it was transferred.

Example scenario

Four partners (A,B,C and D) each have a 25% interest in the small business property of a partnership and transfer the property to an eligible company in which they have equal shareholdings. Assuming this transaction is eligible, transfer duty will not be imposed on the entire value of the small business property because there has been no change in the proportion of each partner’s interest before or after the transfer.

Alternatively, if prior to the transfer A,B, C and D have interests of 40%, 20%, 20% and 20% respectively in the partnership, but transfer to a company in which they have equal 25% shareholdings, duty will not be imposed on 85% of the dutiable value, being a 25% interest in respect of A (being A’s interest after the transfer) and 60% in respect of the interests of B, C and D (being the aggregate of their 20% interests prior to the transfer).

How can we help?

Thynne + Macartney assists primary producers to review their structures and to move assets between structures to meet taxation, succession planning or risk management objectives.

Author: Harriet Adcock (Lawyer)