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Draft legislation introduced re Small Business CGT concession integrity measures

9th April 2018

The Government has introduced draft legislation into Parliament (Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018) in relation to proposed amendments to the Small Business CGT concessions to include additional integrity measures.
 
Under the proposed amendments the Small Business CGT concessions would only be able to be accessed in relation to assets used in a small business or ownership interests in a small business.  This is to prevent taxpayers from accessing the concessions for assets which are unrelated to their small business.

The amendments include additional basic conditions that must be satisfied for a taxpayer to apply the CGT Small Business concessions to a capital gain arising in relation to a share in a company or an interest in a trust (the "object entity").  Broadly, the conditions require that:

  • if the taxpayer does not satisfy the maximum net asset value test, the taxpayer must have carried on a business just prior to the CGT event;
  • the object entity must either be a CGT small business entity or satisfy the maximum net asset value test (applying a modified rule about when entities are “connected with” other entities); and
  • the share or interest must satisfy a modified active asset test that looks through shares and interests in trusts to the activities and assets of the underlying entities.

The amendments are proposed to apply from 1 July 2017.

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