The small business capital gains tax (CGT) concessions are far too complex and eligibility rules need to be simplified, according to the Institute of Public Accountants (IPA).

“Although the rules were subject to a post implementation review by the Board of Tax, the eligibility rules need to be simplified,” said IPA chief executive officer, Andrew Conway.

“Their complexity is partly due to having to deal with multiple business structures and anti-avoidance provisions but there is an opportunity to rationalise and streamline the CGT concessions which was also part of the Henry Review recommendations.

“The four current and separate small business CGT concessions require taxpayers to navigate complex legislation.

“A number of existing concessions such as the 50 per cent reduction and the 15 year exemption are highly concessional and can eliminate any CGT liability when business owners exit their investment.

“The concessions are generally uncapped and are generous tax concessions which should be repealed. The savings can be redirected to assist small businesses during more productive times in the business life cycle,“The concessions reward successful businesses at the end of the business cycle. Many businesses miss out using these concessions due to the fact that the business sale does not generate goodwill.

“The IPA recommends that these concessions be reviewed and redirected towards the start-up and growth phase of the business to improve the chances of survival.

“The CGT concessions provisions provide windfall gains to successful businesses and are too focused on the end point of the business life cycle. They can also reduce incentives for business to grow in certain circumstances.

“We support the recommendation by the Henry Review to rationalise and streamline the CGT small business concessions from four separate concessions down to two,” said Mr Conway.

These recommendations form part of the IPA’s pre-Budget submission. For more information go to: