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22 August 2022

It Depends – Stamp duty relief for small business restructures

In this week’s edition of ‘It depends’, senior associate Tom Walrut talks about the new stamp duty relief for small business restructures.

In this week’s edition of ‘It depends’, senior associate Tom Walrut talks about the new stamp duty relief for small business restructures.

VIDEO TRANSCRIPT

Hi and welcome to this week’s edition of It Depends where we’ll be discussing the newly legislated stamp duty relief for small business entities restructuring into a company.

What is the new duty exemption?

The new duty exemption allows for a restructure of eligible entities from a partnership, discretionary trust or sole trader into a company. It was previously administered under a ruling put out by the QRO, but has now been put into legislation.

Is my business eligible?

Well, as always, it depends. The basic eligibility criteria to apply this exemption are that you have less than $5 million in annual turnover. You have less than $10 million in dutiable value for the property that you’re transferring. And finally, that the transferee company is as close to dormant as you can possibly get it.

What are some tricks and traps with the new duty exemption?

As always, with all of these new duty exemptions, any exemption really, the devil is always in the detail. The first point is that the transferee company needs to be as close to dormant as possible. The biggest point there is that the transferee company can’t have been the beneficiary of any trusts within the group. So, you need to review your entire group structure and take some steps to ensure that the transferee company isn’t a beneficiary of any trust within the group. The next one is that in terms of the turnover, the $5 million turnover test, you can actually average over three years. So, it means if you’ve had two good years and one bad year and that bad year pulled you under $5 million for your annual turnover, you can average it out and still apply the exemption. The third point is that for the $10 million test, it’s only the dutiable value of the assets that you actually transferring, which is going to be subject to the $10 million test, which means that you can cherry pick certain assets if that’s what you’re after. And finally, that there are no clawbacks for the application of the duty exemption, which means that if you restructure as a pre-sale step and use a duty exemption and then sell the shares in the company where there would be no duty, the QRO can’t come back and claw all of that stamp duty back.

As always, we’ve got a very friendly team here. So, if you’ve got any questions about the application of this exemption or any other duty questions, do feel free to give us a call at any time. Thanks.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.

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Scott Hay-Bartlem
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Clinton Jackson
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Tom Walrut
Senior Associate

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