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The old, the new, and the ugly: A comparative analysis of the UK, South African and Australian CGT small business concessions – with recommendations for Australia


Australia’s CGT small business concessions have long been recognised as a problematic area of tax policy. Introduced and steadily expanded for the avowed purpose of assisting Australian small business, these concessions have reached levels of generosity and complexity that alarm both taxation practitioners and academics.

This paper conducts a three-way comparative analysis of the relevant CGT provisions in Australia, the United Kingdom and South Africa with a view to identifying possible improvements from the example of other jurisdictions. To this end, CGT business concessions from each country are compared and evaluated against the widely accepted criteria of good tax policy. While it is shown that certain concessions may be fairly and constructively extended to this sector, the comparative analysis reveals the extent of inequity and inefficiency generated by Australia’s current raft of concessions. Proposals for reform include relaxation of the Active Asset Test to ensure that the concessions are available to all business assets and removal of both the 15-year Exemption and the 50% Active Asset Discount in the interests of equity and efficiency. It is further recommended that the remaining concessions be extended to all businesses regardless of size, as done in the United Kingdom. Rationalisation of the concessions in this manner will enhance simplicity and remove many inequities and economic distortions that currently exist.


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