CGT small business concessions denied

Published on February 23, 2013 at 12:00 AM

A recent case before the Administrative Appeals Tribunal (AAT) has demonstrated the need for great care when structuring arrangements to ensure a taxpayer’s eligibility for the small business capital gains tax (CGT) concessions.

The Tribunal held that the taxpayer had not passed the “maximum net asset value” test for the purposes of the CGT small business concessions in respect of a capital gain made on selling shares to his family trust. The taxpayer was a director and shareholder of a series of interlocking companies. The issue turned on whether a bank loan to the family trust was a liability that could be taken into account in applying the “maximum net asset value” test. However, the Tribunal held the loan could not be taken into account for various reasons.

TIP: One of the conditions for accessing the CGT small business concessions is that the taxpayer (other than those who qualify as small business entities) must satisfy the “maximum net asset value” test. To pass this test, the net value of all the CGT assets of taxpayer (including affiliates and connected entities) must not exceed $6 million (previously $5 million).

The rules are complex. The AAT decision highlights the importance of careful planning when structuring transactions. Please contact our office if you have any questions.

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