Eligibility for the Trust Restructure Rollover

Thinking of restructuring your trust for some reason?  While there are certainly a number of commercial benefits in transitioning from a trust into a company, a common pitfall is failing to acknowledge potential liability for Capital Gains Tax (CGT) or address potential liability for state based transfer duty (Stamp Duty). [Read more…]

Trust restructures – relief from capital gains tax

Capital gains tax (CGT) is applied to and calculated on the realisation of “capital gains”.  If a business wants to transition from a Unit Trust to a company structure (for example) and the value of the Units in the Trust has increased then it’s likely that the sale or transfer of the Units will result in a capital gain by the Unitholder.  In circumstances where the Unitholder may not have actually received any cash to pay the capital gains tax, surely there must be an exception? [Read more…]

Changes to capital gains tax roll-over relief regime

On 8 March 2016, the Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016 (Bill) received royal assent.  The explanatory memorandum for the Bill states that it makes a number of amendments to the Income Tax Assessment Act 1997 (Cth) to provide greater flexibility for small businesses to change their legal structure in order to: [Read more…]

Structuring contracts and capital gains tax

It seems that wherever you turn in Australian commercial transactions you are faced with a state or federal tax.   Capital Gains Tax (CGT) applies to a capital gain which is made upon a disposal of a CGT Asset, subject to specific exceptions and exemptions.  CGT forms part of income tax and is not considered a separate tax.  A capital loss cannot be claimed against income but can be used to reduce a capital gain in the same income year.  If capital losses exceed capital gains in an income year, they can generally be carried forward and deducted against capital gains in future years. [Read more…]

Buy Sell Agreements

Buy/Sell Agreements or Put and Call Option agreements (as they are also referred) are agreements used in the context of business succession to allow for an equity holder’s (Equity Participant’s) estate to be paid out in the event of the their death or disablement.  They are commonly used in conjunction with an appropriate policy of insurance (Insurance Policy) to provide certainty for a business on the death or disablement of an Equity Participant.  It is not usual for Security Holders Agreements to deal with the death of disablement of an Equity Participant as their scope is usually limited to the operation and control of the Enterprise.

Buy/Sell Agreements can be used in a wide variety of entity types where a few Equity Participants hold the majority of the equity in the business (Enterprise).  A Buy/Sell Agreement is applicable where the equity held in a variety of business structures including (but by no means limited to) traditional partnerships, a unit trusts, a proprietary company or other hybrid form of entity.

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