Guide to small business and general business tax break

Warning: This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

Assets used by connected entities or affiliates in carrying on a business

In order for an entity to be entitled to claim the tax break, the entity must be entitled to deductions for the asset's decline in value. This means the entity must be the holder of the asset for the purposes of Division 40 of the ITAA 1997. To claim the tax break, the entity must also use the asset for the principal purpose of carrying on a business.

In some situations a taxpayer may hold an asset but not carry on a business. However, the asset may be used in a business by that taxpayer's affiliate or an entity connected with the taxpayer entity. In this situation, although an affiliate or connected entity uses the asset for carrying on a business, the taxpayer has no entitlement to the tax break. The taxpayer, as the holder of the asset, must use the asset for the principal purpose of carrying on a business if they are to claim the tax break.

Rules in the CGT provisions that allow taxpayers that do not carry on a business but own a CGT asset that is used in a business by the taxpayer's affiliate or an entity connected with the taxpayer to access the small business CGT concessions via the small business entity test do not apply for the purposes of the tax break.

For tax break purposes, the taxpayer entity that holds the asset (not including connected entities or affiliates) must be the entity that uses the asset for the principal purpose of carrying on a business.

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Last Modified: Tuesday, 1 September 2009