Tax Bites

Tax law partnerships and the Small Business Maximum Net Asset Value test

25th February 2016

  • Maximum Net Asset Value test (“MNAV”) calculations can be complicated, particularly where connected entities and affiliates are involved.
  • In the case of connected entities, where the taxpayer has an interest in a connected entity (broadly a 40% interest), 100% of the net value of the connected entity’s CGT assets are brought into the calculation.
  • So what happens with part interests (e.g. a 50% interest) in investments such as residential rental properties?
  • A lot of people may be tempted to think that only 50% of the market value of the residential rental property is brought into the MNAV calculation – after all, it is a direct investment right?
  • But, the 50% interest is an interest in a tax law partnership, and that’s a connected entity.
  • So, instead of bringing in 50% of the market value of the residential rental property, you are bringing in 100%!
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Tax Bites are general in nature and are not a substitute for specific advice. They are the opinion of Tax Advisory Specialists, and the ATO or the Courts may take a different view. They are not updated for changes in the law or the interpretation of the law since publication.

 

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