Passively-held assets
You can access the small business concessions for a CGT asset you own if the asset is used or held ready for use in, or inherently connected with, a business carried on by your affiliate, or an entity connected with you. You must satisfy the following conditions:
- your affiliate, or entity connected with you, is a small business entity for the income year (that is, the income year in which the CGT event happens to your asset)
- you don't carry on a business in the income year other than in partnership
- if you carry on a business in partnership, the CGT asset is not an interest in an asset of the partnership
- your affiliate or entity that is connected with you at a time in the income year is the same small business entity that carries on the business and uses the asset at that time, and the asset is the same asset that also meets the active asset test at that time.
In determining whether the entity that uses the passively-held asset is a small business entity, there's a special rule for calculating aggregated turnover.
An entity that is your affiliate, or is connected with you, is deemed to be an affiliate of, or connected with the small business entity that uses the asset. In calculating the aggregated turnover of the small business entity, the turnover of entities that are deemed to be affiliates or connected entities must be included. The calculation of aggregated turnover is otherwise the same.
A special affiliate rule for spouses and children under 18 also applies.
Example
Peter owns land that he leases to a company he wholly owns, Fossy Farm Pty Ltd, which uses the land in its farming business. Peter does not carry on a business himself.
Peter would be able to access the small business CGT concessions through the small business entity turnover test, depending on the aggregated turnover of Fossy Farm Pty Ltd.
Peter has an affiliate, Mike, who carries on a separate business. Mike acts in accordance with Peter's wishes in running his business. The special rule for calculating aggregated turnover will apply to treat Mike as Fossy Farm's affiliate also. When working out Fossy Farm's aggregated turnover, Mike's turnover will need to be included.
End of exampleConcessions not available for super funds
The small business concessions are not available for any capital gain a super fund makes on the sale of an asset used in a related entity's business.
For example, a super fund may own premises used in the business of a related entity. However, as the members or trustees of the fund (who typically also control the related entity) don't control the fund in the manner required, the related entity is not a connected entity and, therefore, the business real property is not an active asset.
See also:
You can access the small business concessions for a CGT asset you own if the asset is used or held ready for use in, or inherently connected with, a business carried on by your affiliate, or an entity connected with you.