Money
Issue No. 37 - October/November 2007
CGT reform leaves smallholders liable
by Ian Snook
Business advisory and accounting firm William Buck is warning small businesses to be aware of new capital gains tax (CGT) legislation that may leave some small businesses in a tax liability trap.
The legislation, operational since 1 July, brings CGT laws in line with other small business concessions, such as fringe benefits tax.
Before it was introduced, William Buck urged the Federal Government to amend the legislation to make it easier for different types of small businesses to be eligible for capital gains tax relief. However, the amendment was not picked up in the final Bill introduced on 10 May 2007.
Although the new legislation simplifies and aligns small business concessions rules, some small business structures, including farming enterprises, will still miss out on the CGT concessions.
Under the new laws, the small business CGT concessions will apply if a maximum net asset value test of $6 million is met; or the taxpayer making the capital gain is either a ‘small business entity’ with a turnover of less than $2 million per annum or a partner in a partnership that is a ‘small business entity’ and the asset is an asset of the partnership.
Only an entity that conducts a business can ever be a ‘small business entity’.
Small business owners with land assets operated by a related but separate entity will not be eligible for small business CGT concessions under the new ‘small business entity’ test...
