Consequently, under the “tick the box” proposal, if a trust made this election, from that time it would be denied the benefit of the 50% CGT discount on any trust assets other than for:
- Goodwill; or
- the proportion of shares held by the trust in a company which represented the goodwill of that company.
An immediate question arises as to why a specific regime to enable trusts to access company funds for working capital purposes is being created but the provision of similar options for partnerships and sole traders with working capital requirements are not.
A serious question also arises as to the potential for additional complexity to be added to Division 7A, when one the principal objectives of the Review is relieve SME taxpayers from the compliance costs arising out of the current complexity of the Division.
Tony Riordan is the tax partner dealing with Division 7A issues.