CGT rollover rules under review

Late last year it was announced by the government that the Board of Taxation (BoT) would be tasked with reviewing the rules around CGT roll-overs.

At present, the taxation law allows certain CGT events to occur without crystallising liabilities to tax in circumstances where it is considered appropriate for the CGT liability to be deferred until a later time (that is, the CGT liability is “rolled over”). Over time, the provisions catering for these circumstances have multiplied to the point where navigating the law is difficult. 

The BoT was requested by the government to identify and evaluate opportunities to rationalise the existing CGT rollovers and associated provisions into a simplified set of rules. These would have a substantially similar practical effect, but would be easier to use and interpret.

The government’s terms of reference gives room for the BoT’s review outcome to contain recommendations to repeal unnecessary rollovers, or express them in a more principled fashion, so that one can do the work of many. In doing so, it says the Bot should have regard to the two main categories of rollovers, namely;

  • rollovers where there is no change in underlying economic ownership after the CGT event, and
  • rollovers where the disposal is involuntary (effectively forced upon the taxpayer at a particular time rather than occurring at a time chosen by them).

The terms of reference also state that if the BoT comes to the view that the system would benefit from additional categories of rollovers to complement the two key principles above, then it is free to make this suggestion. In doing so, the government has recommended that the BoT ensure that any proposals that defer CGT encourage the active use of assets in the economy and, consequently, support the payment of income tax on profits generated from using those assets (for example, when compared with no change in ownership).

In general, the BoT has been tasked with simplifying the process of giving advice on rollovers and reduce the regulatory burden on affected businesses, while:

  • protecting the tax system against the risk that any CGT deferral becomes permanent, and
  • having regard to the overall revenue cost of the system of rollovers and the integrity of the tax system generally.

The BoT has organised a series of “in-person” roundtable consultations will be held on the following dates in 2020:

  • Melbourne – Thursday 20 February 2020.
  • Sydney – Thursday 26 March 2020.
  • Perth – (date to be finalised)
  • Brisbane – Thursday 30 April 2020.

Register your interest in attending one of the roundtables by emailing CGTrollovers@taxboard.gov.au or contacting the Board’s Secretariat on (02) 6263 4366. If you are unable to attend one of the initial sessions listed above and would like to provide feedback, you can contact the Board’s Secretariat on the above contacts to discuss other ways you can share your views.

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