Currently, the concessions cannot be utilised where the CGT asset is owned by an entity that is not a small business entity, even though the asset is being used by a related entity in carrying on a business. An amendment will allow a taxpayer who owns a CGT asset that is used in a business by an affiliate or a connected entity of the taxpayer, to access the small business CGT concessions through the $2m aggregate turnover test. To ensure that larger businesses cannot use these structures to gain access to the concessions, the aggregated turnover test of $2m per annum will be applied to the asset owning entity, its affiliates and connected entities (including the business entity).
Secondly, to better align the small business entity test with the $6m maximum net asset value test, a partner who owns a CGT asset will be able to qualify for the small business CGT concessions via the small business entity test, where the asset is used in a business carried on by the partnership. It will not be necessary for each partner in the partnership to own the asset in accordance with their fractional interest in the partnership. The amendment recognises that commercially, different partners may contribute different assets to the partnership for use in the business, while retaining their ownership of such assets. The amendment will allow a partner who owns a CGT asset to qualify for the concessions without the asset having to be an asset of the partnership, provided their aggregated turnover is less than $2m, which will take into account the annual turnovers of the partnership, its affiliates and connected entities.
The amendments will take effect from the 2007-08 income year, consistent with the start date of the measures contained in the Tax Laws Amendment (Small Business) Act 2007.
For a copy of the Minister's press release, 22 October 2007, go here