Capital Gains Tax Bills For Failing Test
The Administrative Appeals Tribunal has recently handed down two separate decisions concerning capital gains tax (CGT) concessions for small businesses. The tax law offers a range of tax concessions for small businesses that have made a capital gain on a "CGT asset" that has been used in the business. The concessions can reduce, eliminate or roll-over a capital gain. However, the concessions are only available if certain tests are met. The main issue before the Tribunal was whether the taxpayers satisfied the "maximum net asset value" test. The test would be satisfied if, just before the "CGT event", the value of the assets of the taxpayers and their connected entities did not exceed $5 million.
Broadly, the Tribunal held the taxpayers did not meet the then "maximum net asset value" test in order to qualify for the concessions. The taxpayers did not satisfy the onus of proving that the "maximum net asset value" of the assets of the taxpayers and their connected entities were less than $5 million. In the first case, the Tribunal denied the taxpayer the concessions with respect to the sale of a marina for $8.9 million. In the second case, the Tribunal also refused the taxpayer the concessions in respect of a gain he made on selling two $1 shares in a company for $4.9 million.
There have been changes to the relevant rules. For example, the amount for the "maximum net asset value" test increased to $6 million. If you have any questions please contact our office.
