4 March 2003

Roll-over Relief for Simplified Tax System Partnerships

Roll-over relief announced today by the Government will make the Simplified Tax System (STS) more attractive to small business partnerships, particularly rural and farming businesses.

Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, said optional roll-over relief will be available under the STS where a change in the partners of a small business partnership occurs.

Senator Coonan said this often happens when new family members are introduced into a family business or when an existing partner retires from the business.

"Changing the partners in a business partnership causes a change in the ownership of partnership assets," Senator Coonan said.

"This change can trigger taxable gains in relation to depreciable assets.

"Roll-over relief will remove this taxing point so that a taxable gain will only arise when the business ultimately disposes of its depreciable assets.

"The fact that there has been no roll-over relief has been a deterrent to some taxpayers joining the STS.

"Many farming partnerships keep the farming business in the family and it is common for partners to be added to the partnership as children grow up and parents leave the partnership on retirement or death.

"These businesses can now join the STS knowing that a partial change in partnership will not trigger tax consequences in respect of depreciable assets."

The STS was introduced to reduce the tax compliance burden on small businesses and farmers by providing eligible small businesses with

  • a cash basis of recognising income and deductible expenses;
  • simpler depreciation; and
  • easier trading stock rules.

"One of the important benefits of the STS is the ability to immediately write off depreciating assets costing less than $1,000 and a simple pooling method for claiming depreciation on other assets.

"This significantly reduces record-keeping and compliance costs for small business taxpayers."

Senator Coonan said the change will provide more consistency under the STS as is available under the uniform capital allowance provisions.

Roll-over relief amendments will be effective from the start date of the STS, 1 July 2001, so eligible taxpayers can elect to enter the STS in their 2001/02 tax return.

Further information on the STS can be found on the Tax Office website at www.ato.gov.au or phone 13 24 78.