Amendments to scrip for scrip roll-over, the small business concessions and beneficial interests

The government announced in the 2011-12 Budget that it will ensure the scrip for scrip roll-over integrity provisions that apply to individuals and companies also apply to trusts, superannuation funds and life insurance companies.

The government will also amend the small business tax concessions so that trusts cannot avoid being treated as connected entities for the purpose of testing eligibility for the concessions as trusts do not own assets for their own benefit. These measures will have effect for capital gains tax events happening after 7.30pm (AEST) on 10 May 2011.

In addition, in the 2012-13 Budget, the government announced that it will make changes to support the effective operation of the 2011-12 Budget measure providing greater consistency in applying the scrip for scrip roll-over and small business concessions to trusts, superannuation funds and life insurance companies.

In particular, the proposed amendments ensure that the provisions concerning absolutely entitled beneficiaries, bankrupt individuals, security providers and companies in liquidation interact appropriately with the capital gains tax provisions and with the connected entity test in the small business entity provisions. These changes will apply at the option of taxpayers from the 2008-09 income year and automatically from Royal Assent.

The proposed amendments also ensure that consequential impacts on the Wine Equalisation Tax Act 1999 through the operation of the changes to the connected entity test apply to wine producers from the first financial year after the amending legislation receives Royal Assent.

These proposals are not yet law.

Administrative treatment

The ATO will accept tax returns as lodged during the period up until the proposed law change is passed by Parliament. Past year assessments will not be reviewed in relation to this proposal until the outcome of the proposed amendment is known.

After the new law is enacted, those taxpayers who:

lodged in accordance with the changes do not need to do anything more
did not lodge in accordance with the changes should seek an amendment and if

a reduction in liability results, interest on overpayment will be paid where applicable
an increase in liability results, no tax shortfall penalties will be applied and any interest accrued will be remitted to the base interest rate up to the date of enactment of the law change. In addition, any interest in excess of the base rate accruing after the date of enactment will be remitted where taxpayers actively seek to amend assessments within a reasonable timeframe after enactment.

If the proposed law change does not proceed, the ATO will issue further advice.

More information

Last Modified: Monday, 20 May 2013

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