The basic conditions for passively-held assets and partner’s assets require that:
- the asset is used in the business of your affiliate, connected entity or partnership, at a time in the income year that the CGT event happens, and
- that entity is a small business entity in the year the event happens.
If an entity is not using the asset in the business in the year the CGT event occurs because the business the entity previously carried on is winding up, there is a special rule that applies provided the entity used the asset in the business in the year the business ceased.
This rule treats the entity as carrying on the business for a moment in time in the income year the CGT event happens and treats the asset as being used, held ready for use in, or inherently connected with, the business at that same moment in time in the CGT event year.
There is another rule that applies for all the basic conditions that use the turnover test; this rule allows an entity to work out whether it is a small business entity in the CGT event year when the entity is winding up a business it previously carried on. The entity will be taken to be still carrying on the business if:
- it is winding up a business it previously carried on, and
- it was a small business entity in the income year the entity ceased business.