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MNAV test: asset and liability issues


The one test in the small business capital gains tax (CGT) concessions which causes most taxpayers concern and generates most reviews by the Australian Taxation Office is the maximum net asset value (MNAV) test under s 152-15 of the Income Tax Assessment Act 1997 (Cth). This test provides that the net value of the CGT assets of an entity is calculated as the sum of the market values of the entity’s CGT assets less the liabilities of the entity that are related to the assets and less certain provisions.

This article examines the working of the MNAV test in detail. The article considers the net value of CGT assets, the meaning of market value, cash in hand as a CGT asset, statute barred loans, assets with partial private use, the existence of a liability just before the CGT event, the related liability issue, contingent liabilities, and whether liabilities should be GST inclusive or exclusive.

Author profile

Robert Warnock CTA
Rob is a Principal Lawyer at Harwood Andrews, Victoria’s largest firm with a head office based in a regional centre. Rob has over 30 years’ experience in tax advising. Rob helps accountants, businesses and individuals on matters with his areas of practice including trusts, state and federal taxes, tax disputes, business structuring and asset protection. - Current at 29 January 2021
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