$10m eligibility threshold must be across the board for SBCGT concessions, IPA says

Speaking to Accounting Times, IPA taxation and superannuation adviser Letty Chen has said that the eligibility threshold for the CGT concession should be raised to $10 million across the three remaining small business CGT (SBCGT) concession categories.

This follows the prime minister and treasurer announcing carve-outs on 18 June, including increasing the turnover threshold for the active asset CGT reduction from $2 million to $10 million.

“What’s happened now is that we've added complexity, we've added compliance burden, and we still want to see the other three [concession thresholds] go up to $10 million as well,” Chen told Accounting Times.

“We do feel that increasing from $2 million to $10 million will be more reflective of the current economic realities.”

“The world of taxes has actually been calling for [this], but what we wanted to see [was the full adoption] of the Board of Taxation’s recommendations [to] increase the threshold to $10 million for the other three [small business CGT] (SBCGT) concessions,” she said.

These recommendations were contained in the board’s recommendations in its 2019 Review of Small Business Tax Concessions — Final Report.

In this report, the board recommended increasing the turnover threshold to $10 million per annum for all SBCGT changes, to make the concessions “simpler, fairer and more sustainable”.

In the IPA's submission, Capital gains tax reforms — arrangements for innovative start-ups, the institute’s senior tax advisor Tony Greco wrote: “The amendment of the active asset reduction turnover threshold provides an opportunity for the Government to legislate other changes with the same commencement date of 1 July 2027.”

“Of highest priority is to raise the eligibility threshold of the other three SBCGT concessions to $10 million. The $2 million threshold has remained unchanged since 2007-08 — almost 20 years ago.

“With the threshold change for the active asset reduction, we have changed from a single ‘basic conditions’ eligibility gateway to all four concessions to a two-tier one, which increases complexity and compliance burdens for taxpayers while not addressing the underlying issues,” the submission read.