In brief - The Queensland Office of State Revenue has introduced an administrative arrangement which exempts certain restructures involving small businesses from transfer duty and vehicle registration duty.

The exemption applies to restructures entered into on or after 7 September 2020 which involve the transfer of assets from a small business conducted by an individual, partnership or discretionary trust, to a company in which the shares are held by the original owners of the assets in the same proportion as they held the assets. A partial exemption is available if the shares are held by the original owners in different proportions to the ownership of the assets or other shareholders are introduced to the transferee company.

Queensland is one of the few Australian jurisdictions that imposes transfer duty on the transfer of business assets. The imposition of transfer duty on the transfer of Queensland business assets has always been an impediment to restructures that do not qualify for the corporate reconstruction exemption. 

Conditions for eligibility and situations when a full or partial exemption will be available

The key conditions for eligibility are:

  • the owner of the assets is a small business entity

  • the assets are small business property

  • the dutiable value of the assets is not more than $10 million (the Office of State Revenue may accept the book value of the assets as evidence of their value)

  • the transaction is the transfer or agreement for the transfer of the assets

  • the transferee of the assets is either a newly incorporated unlisted company or an unlisted company that has been dormant since its incorporation, and

  • the shareholders of the transferee company include all of the members of the small business entity.

A small business entity is an individual, partnership or discretionary trust (not a unit trust or any other type of trust) that: 

  • directly holds dutiable property that is actively used by the small business entity in its business (called small business property)

  • carries on a business in Queensland or has Queensland customers, and

  • has an annual turnover of not more than $5 million.

A full exemption is available in the following situations:
 

Type of small business entity

Shareholders in transferee company

Individual

The individual is the only shareholder

Partnership

Each of the partners are the only shareholders and the shares are held in the same proportion as their partnership interests

Discretionary trust

The default beneficiaries under the trust deed are the only shareholders and the shares are held in the same proportion as their trust interests 


A partial exemption is available if other shareholders are introduced to the transferee company or the shareholdings do not reflect the partners' partnership interests or the default beneficiaries' trust interests. The administrative arrangement contains some examples illustrating how the partial exemption will operate. In essence, transfer duty and vehicle registration duty is still payable to the extent that there is a change in the underlying ownership of the assets.

Key differences between administrative arrangement and capital gains tax rollover

The exemption in the administrative arrangement is similar to capital gains tax rollover for the transfer of assets to a wholly-owned company under subdivisions 122-A and 122-B of the Income Tax Assessment Act 1997, with the following key differences:

 

Administrative arrangement

Capital gains tax rollover

A partial exemption is available if the transferee company is not wholly-owned by the owners of the assets

There is no partial rollover available

A partial exemption is available if the shareholdings in the transferee company do not reflect the original partnership interests or trust interests

There is no partial rollover available for partnerships. The rollover for trusts operates differently

The exemption only applies to discretionary trusts

The rollover applies to all trusts

The default beneficiaries must be shareholders in the transferee company

The trustee of the trust must be the shareholder in the transferee company


There are some important differences in the application of the administrative arrangement and capital gains tax rollover to trusts, which may mean that a restructure of a small business conducted by a trust cannot be implemented without either transfer duty or capital gains tax being imposed. While it would have been better if the treatment of trusts in the administrative arrangement broadly aligned with the capital gains tax rollover, the introduction of the exemption is welcome relief for small business owners who are considering a business restructure.

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2020.

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