• The 90% test

    Attention

    Warning:

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

    End of attention

    The 90% test only applies if there is an interposed entity between the CGT concession stakeholders and the company or trust in which the shares or interests are held.

    The interposed entity satisfies the test if small business participation percentages in that entity totalling at least 90% are held by CGT concession stakeholders of the company or trust in which the shares or interests are held.

    As with the significant individual test, the participation percentage can be held directly or indirectly through multiple interposed entities. 

    Example

    Diagram showing the 90% test

    The discretionary trust sells the units in Unit Trust.

    Catherine, a significant individual and a CGT concession stakeholder of Unit Trust, has a 72% participation percentage in Discretionary Trust.

    80% x 90% = 72%

    If the other interests in Discretionary Trust are held by people who are not CGT concession stakeholders, Discretionary Trust will not satisfy the ownership requirement and will not be able to access the concessions.

    End of example

     

    Example

    Based on the ABC Trust example:

    • Jennifer, a significant individual and CGT concession stakeholder of Operating Co, has an 80% small business participation percentage in ABC Trust
    • Bill, a CGT concession stakeholder of Operating Co, has a 15% small business participation percentage in ABC Trust
    • Nicky, who is not a CGT concession stakeholder of Operating Co, has a 5% small business participation percentage in ABC Trust.

    At least 90% of the participation percentages in ABC Trust are held by CGT concession stakeholders of Operating Co. As a result, ABC Trust satisfies the ownership requirement if it sells its shares in Operating Co, and can access the concessions on those shares, provided the other conditions are met.

    End of example

     

      Last modified: 18 Mar 2015QC 39821