Maximum net asset value test



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There is a limit of $6 million on the net value of the CGT assets that you and certain entities can own and still qualify for the small business CGT concessions. This $6 million limit is called the maximum net asset value test. It is not indexed for inflation.

You satisfy the maximum net asset value test if the total net value of CGT assets owned by the certain entities does not exceed $6 million just before the CGT event that results in the capital gain for which the concessions are sought. You must include the net value of CGT assets owned by:

  • you
  • any entities connected with you, and
  • any of your affiliates or
  • entities connected with your affiliates (subject to the note below).

The assets of your affiliates, or entities connected with your affiliates, are included in the maximum net asset value test only if those assets are used, or held ready for use, in a business carried on by you or by an entity connected with you (but not an entity connected with you only because of your affiliate).

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Colin operates a newsagency business as a sole trader. Simon carries on his own florist business, which is unrelated to the newsagency business. Simon owns the land and building from which the newsagency is conducted and leases it to Colin. Simon also owns 100% of the shares in Simco Pty Ltd which carries on another separate business. Simon is connected with Simco Pty Ltd as he controls the company. Simon regularly consults Colin for advice in his business affairs and acts according to Colin's wishes, therefore Simon is Colin's affiliate.

In determining whether he satisfies the maximum net asset value test, Colin includes the market value of the land and building owned by Simon (because it is used in his newsagency business) but does not include Simon's other assets used in his florist business (because they are not used in the newsagency business). Nor does Colin include Simco's assets because those assets are not used in his business and Simco Pty Ltd is only connected because of his affiliate Simon.

Last modified: 30 Jun 2009QC 27964