On 16 December 2019, the ATO reminded tax agents (and taxpayers) that they might have to amend their clients (their own) tax returns if they have claimed ‘small business CGT relief, under an ‘Everett’ assignment of a partnership interest, after amending legislation was past.
See below for further details about the reminder.
Changes to small business CGT concessions – relating to ‘Everett’ assignments of partnership interests
On 16 December 2019, the ATO reminded tax agents (and taxpayers) that they might have to amend their clients (their own) tax returns if they have claimed ‘small business CGT relief, under an ‘Everett’ assignment of a partnership interest, after amending legislation was past, on 28 October 2019, retrospectively preventing this, on assignments entered into, after Budget night in 2018 (8 May 2018).
There has been recent legislative changes, to the small business CGT concessions, to’ improve their integrity’ – in the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No 1) Bill 2019, which received Royal Assent on 28 October 2019 (see related TT article).
The changes ensure that the CGT concessions are only available for capital gains arising from CGT events that relate to rights or interests that entitle an entity to income or capital of a partnership by making that entity a partner of the partnership.
If your clients have made a capital gain since 8 May 2018 by assigning their right or interest to the income or capital of a partnership, they may not be able to access the small business CGT concessions unless they satisfy certain conditions.
You should review your clients’ arrangements that may be affected by the changes, if your clients have lodged their 2017–18 or 2018–19 tax returns claiming the small business CGT concessions in relation to these capital gains.
If your clients are no longer entitled to the concessions, they must amend their returns. If they amend within a reasonable timeframe after 28 October 2019 (when the law was enacted):
- no tax shortfall penalties will be applied
- interest accrued will be remitted according to our administrative treatment of retrospective legislation.
- any interest attributable to the shortfall will be remitted to nil up to the date of enactment of the law change
- any interest accruing after the date of enactment will be remitted if you actively sought to amend your assessments or revise your activity statements within a reasonable time after the enactment of the law change (a reasonable time to be determined on a case-by-case basis).
[ATO website – remitting interest penalties for retrospective changes]