By the South Australian Business Chamber Executive Director, Operations and Finance, Steven Moore.
The Australian economy needs entrepreneurs, there’s no doubt about it, because they’re prepared to take risks to succeed and by doing so, drive genuine and sustained wealth creation. What motivates entrepreneurs is invariably different, but most have a sense of wanting to be in charge of their own destinies and not relying on others, including governments.
Many entrepreneurs operate their businesses through collaborative structures to achieve their ambitions, from partnerships to small proprietary limited companies. Since 1999, the tax system has worked to enable stakeholders in small businesses to access a Capital Gains Tax concession provided their individual assets, including their share of company assets, are worth less than $6 million.
In last year’s Federal Budget, a change was announced to this long-standing small business concession to stamp out instances where high net-worth individuals were accessing the concession by establishing unrelated businesses. When the bill was tabled nine months later, that change had been extended to limit the concession to genuine small business collaborations where the assets being sold exceeded the pre-existing threshold.
While the South Australian Business Chamber supports the Federal Government making sure the tax system has integrity, it also needs to be careful to not unfairly impact the retirement plans of many small business owners who have invested in genuine small business collaborations. We have many examples from members where the owners of long-established small businesses now face capital gains tax bills of hundreds of thousands of dollars each upon the sale of their entity, which can often be their entire retirement nest egg.
These are not wealthy people and have typically drawn limited wages from their businesses over time to build a retirement asset, at the same time employing many people and contributing to the broader South Australian economy.
The South Australian Business Chamber’s tax expert reference group has been working collaboratively with independent South Australian Senator Tim Storer to propose an amendment to the bill to correct the flaw and avoid unfairly casting the net to capture small business people involved in genuine collaborative structures, whether they be farms, manufacturers or professional practices.
We are calling on the Federal Government led by our new Prime Minister, Scott Morrison, to amend the bill and show continued support for new and existing collaborations in the small business sector.
We know collaborations can often lead to the best outcomes, including in business, but we need to make sure we get the fundamentals right to encourage these. Small business people need to have confidence that if they make long-term investments in collaborative structures, including employing many South Australians, the tax system will not shift the goalposts, particularly as they near retirement. If they have a go, they should get a fair go.
This article was originally published in the South Australian Business Journalin The Advertiser on Tuesday 4 September 2018.
Image: Outgoing the South Australian Business Chamber chairman Vincent Tremaine by Calum Robertson for The Advertiser
