Changes to the capital gains tax (CGT) small business concessions over recent years have improved access and made it easier for taxpayers to work out if they are eligible for the concessions.
The initial changes became law in June 2007 and applied from the 2007-08 income year. These included:
- the introduction of a $2 million aggregated turnover test (turnover test) as an alternative to the maximum net asset value test
- increasing the threshold of the maximum net asset value test to $6 million.
The government announced further changes in the 2008 Budget, which became law in June 2009. The main changes allow access to the concessions by way of the turnover test for:
- taxpayers who are not carrying on a business but who own a CGT asset used in the business of an affiliate or entity connected with the asset owner, and
- partners who own a CGT asset (that is not an interest in a partnership asset) used in the partnership business.
These changes apply for the 2007-08 income year. See Passively-held assets and Partner's assets.
Other minor changes became law in June 2009 and improve the operation of the concessions.
The minor amendments include changes to:
- increase the circumstances and purposes for which a spouse or child under 18 years is taken to be an individual's affiliate
- increase access to the concessions for joint tenants and trustees of testamentary trusts where a gain arises from an asset within 2 years of the individuals death, where the deceased would have been eligible for the concessions
- enable certain liabilities to reduce an entity's net asset value in applying the $6 million maximum net asset value test
- ensure all uses of an asset (except certain personal use and certain uses from which passive income is derived) are considered in determining what its main use is
- the operation of the retirement exemption to remove unintended consequences by:
- allowing access to the retirement exemption in certain circumstances where the replacement asset conditions have not been met for the small business rollover
- correcting the treatment of capital proceeds received in instalments
- ensuring the retirement exemption caters for CGT exempt payments flowing through small business structures involving interposed entities, and
- excluding small business retirement exemption payments made to CGT concession stakeholders from the deemed dividend provisions of section 109 and Division 7A of the Income Tax Assessment Act 1936.
As some changes are retrospective, taxpayers have additional time to make their choice to use the concessions where they become eligible as a result of the June 2009 amendments.
The taxpayer has until the latest of:
- the day the entity lodges its income tax return for the income year in which the relevant CGT event happened
- 23 June 2010 (12 months after the day on which these amendments received royal assent),and
- a later day allowed by the Commissioner.
The extension of time to make a choice applies to CGT events happening before the 23 June 2009.
The following table summarises the various start dates for the June 2009 amendments.
Thing affected
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Applies to events happening
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Joint tenants and testamentary trusts
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in 2006-07
|
Retirement exemption - J5 and J6 events
|
in 2006-07
|
Passively-held assets
|
in 2007-08
|
Spouses and children under 18 as affiliates - Passively held assets (transitional rule does not apply)
|
in 2007-08
|
Spouses and children under 18 as affiliates - Passively held assets (transitional rule applies)
|
on or after 19 March 2009
|
Partners assets
|
in 2007-08
|
Retirement exemption - capital proceeds
|
in 2007-08
|
Retirement exemption - interposed entities and deemed dividends
|
on or after 23 June 2009
|
Active asset main use to derive passive income
|
on or after 23 June 2009
|
Net asset value - liabilities
|
on or after 23 June 2009
|
Choices transitional rule
|
prior to 23 June 2009
|
Last Modified: Thursday, 28 June 2012