The capital gains tax concessions

Home | About Us Small business capital gains tax concessions - would you pass the test? Friday, 8th November, 2013, by Ana Cox In today's Smart Tax Bulletin: Requirements for accessing small business CGT concessions Dear Reader, One of the more positive aspects of owning a small business are the small business capital gains tax (CGT) concessions, which can be accessed when selling a business or retiring. The small business CGT concessions can provide significant tax relief when used correctly, but it's very important to make sure you meet the requirements before claiming them or you may be up for a significantly larger tax bill than you'd bargained for! To make a claim a taxpayer must pass either the $2 million turnover test or the maximum net asset value (MNAV) test. In today's edition of the Smart Tax Bulletin, our Editor-in-Chief, John Kelly, will take a look at a particular case in which one taxpayer didn't pass either test and paid the price for wrongly claiming small business CGT concessions. Read on for more from John, to ensure something similar doesn't happen to you… Have a great weekend! Ana Cox Editor Smart Tax Bulletin Bulletin continued below... ....................................................................................Advertisement...................................................................................... It's more likely now than ever before that the ATO will review your business.  Click here to find out how to prepare for the ATO's Audit Blitz  ................................................................................................................................................................................................... A word of warning about the small business capital gains tax concessions By John Kelly Editor-in-Chief, Smart Tax HandbookThe small business capital gains tax (CGT) concessions are a wonderful thing, allowing small business owners tax relief when selling their business or retiring. However, as one taxpayer recently found out, the law governing these concessions is complex and the devil is in the detail. You can only access the small business CGT concessions if you satisfy either: the $2 million turnover test; or the maximum net asset value (MNAV) test, which means the maximum value of assets held by the taxpayer and any associated entity must not exceed $6 million (it was previously $5 million).  In the case at hand, the taxpayer was entitled to a $6 million capital gain made by a trust and had claimed the small business CGT concessions in order to substantially reduce the amount of CGT payable. However, the court found the taxpayer failed the MNAV test for the following reasons: A loan was not able to be taken into account because it had been used to buy a home and was therefore excluded. A second loan taken out to pay a distribution of capital (i.e. a distribution of the assets of the trust) to a beneficiary was not related to the CGT assets of the trust and was also excluded. As a consequence of the two loans being excluded, the taxpayer failed the MNAV test and the small business CGT concessions were not available to him. If you are getting close to retiring or wish to sell your business and use the proceeds to buy a new business, please seek tax advice as to whether you can access the small business CGT concessions before you make any decisions. As we can see from the example above, the impact of getting these rules wrong can be very costly. Warm regards, John Kelly Editor-in-Chief Smart Tax Handbook Can a colleague or friend benefit from today's bulletin? Knowledge is one of the biggest assets in any business. So why not forward this on to your friends and colleagues so they too can start taking advantage of these health and safety tips? Like the Smart Tax Bulletin? Check out our other free bulletins: Workplace BulletinGet the very latest employment law tips, ideas, news and practical advice sent straight to your inbox. Click here to sign up now. Health & Safety BulletinAll the latest tips, tools and strategies you need to help you stay on top of health and safety laws. Click here to sign up now. Simply Social Media BulletinReceive handy links, ideas and tips to help you use social media effectively in your business. Click here to sign up now. Please whitelist the Smart Tax Bulletin to make sure you get every edition delivered to your inbox. The information in this email is intended solely for the addressee. Access to this email by anyone else is unauthorised. If you are not the intended recipient, please return the message to the sender and delete it from your records. All content is © 2007-2013 Portner Press Pty Ltd All Rights Reserved. Disclaimer: We research our recommendations and articles thoroughly, but disclaim all liability for any inaccuracies or omissions found in our publications. Click here to view our Privacy Policy and Terms and Conditions. Queries: For general enquiries, email cs@portnerpress.com.au or call 1300 782 911. Smart Tax Helpdesk: Paid subscribers to the Smart Tax Handbook can ask our experts for advice. Syndication: To republish a Smart Tax Bulletin article, please email cs@portnerpress.com.au for information. Smart Tax Bulletin ISSN 1838-9651 Portner Press Pty Ltd 96-98 Bridport Street Albert Park VIC 3206 Australia To unsubscribe to the Smart Tax Bulletin, click here.