Lack of interstate tax conformity costing business dear

Abolishing the duty on the transfer of business assets simplifies the rules and reduces compliance costs for businesses.

Queensland may become a less desirable destination for businesses after the Palaszczuk Government failed to abolish an important taxation measure in its latest budget.

The Palaszczuk Government ignored a call to remove duty on the transfer on businesses’ assets in its second budget, and despite Treasurer Curtis Pitt announcing a $40 million Industry Attraction Fund – aimed at luring businesses to Queensland – I fear the Government has forgotten such concessions could support the growth of existing Queensland businesses.

With New South Wales set to follow suit in its state budget tomorrow, Queensland lingers with Western Australia and the Northern Territory as the only jurisdictions to still enforce this outdated measure on the transfer of business assets.

The Industry Attraction Fund is great for enticing new businesses to Queensland, but let’s not forget about our existing businesses. We want businesses to remain in Queensland so it makes sense to give them access to the concessions as well.

This is what other states have done, so it’s disappointing the Government seems to have forgotten the state’s existing businesses. The longer Queensland continues to enforce this, the longer our state will remain less desirable to businesses looking to set up and operate, as duty will be imposed on any acquisitions and disposals of business assets.

Abolishing the duty on the transfer of business assets simplifies the rules and reduces compliance costs for businesses – a win-win for Queensland business. Having duty on the transfer of business assets means internal restructures can become costly. So, if a business wants to transfer its assets around in order to operate its business more efficiently, it may incur stamp duty in doing so. Or alternatively, the stamp duty costs may prevent it from doing so.

Although there is an exemption for internal corporate restructures in certain circumstances, businesses are having to spend time and money obtaining Office of State Revenue rulings on whether they would meet the requirements of those exemptions before undertaking the restructures.

The push for the State Government to abolish the rules is less about bolstering Queensland’s attractiveness to business, and more about promoting national conformity to ensure Australian businesses can easily restructure and relocate without having to consider burdensome duty and compliance costs.

Put simply, it would be far simpler for all jurisdictions to have the same rules. The discrepancy between jurisdictions places huge compliance costs on businesses so it just makes sense for everyone to play by the same rules.

As goodwill and intellectual property are generally located where a business’s customers are, business sales will often involve transfers of goodwill and intellectual property in many jurisdictions around the country. If the rules are different in each state and territory, a business has to deal with engaging legal or accounting professionals to look at the all the different rules and determine whether they have to cough up or not.

The administrative rigmarole businesses have to go through when this happens as well as the costs associated can often be disproportionate to the amount of revenue ultimately collected, deeming the move unworthy.

Leisa Rafter, Tax Partner, BDO Australia

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