ATO Interpretative Decision

ATO ID 2003/749

Income Tax

Capital gains tax: small business 50% reduction - trustee assessed under section 99A of the Income Tax Assessment Act 1936
FOI status: may be released

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If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the taxpayer, the trustee of a unit trust (receiver and manager appointed), entitled to the small business 50% reduction under Subdivision 152-C of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the net capital gain assessed to the trustee under section 99A of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

No. The trustee is denied the benefit of the small business 50% reduction by section 115-225 of the ITAA 1997.

Facts

The unit trust operated a business. A receiver and manager was appointed to carry on and arrange the sale of the business. The appointment was not made under the Bankruptcy Act 1966.

The disposal of the business will give rise to a net capital gain which will be included in the net income of the unit trust. The proceeds of the sale net of tax must be used to pay outstanding creditors.

The beneficiaries of the unit trust will not be presently entitled to the net capital gain and it will be assessed to the trustee under section 99A of the ITAA 1936.

Reasons for Decision

Section 115-225 of the ITAA 1997 operates to reverse the benefit of the application of the small business 50% reduction under Subdivision 152-C of the ITAA 1997 where the trustee has been assessed under section 99A of the ITAA 1936. Section 115-225 of the ITAA 1997 reverses the benefits by providing that where a trust's net income includes a capital gain to which:

•
either the CGT discount or the small business 50% active asset reduction has applied, that amount is doubled; or
•
both the CGT discount and the small business 50% active asset reduction, that amount is multiplied by four.

Date of decision:  30 July 2002

Year of income:  Year ended 30 June 2001 Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1936
   section 99A

Income Tax Assessment Act 1997
   section 115-225
   Subdivision 152-C


   Bankruptcy Act 1966

Related ATO Interpretative Decisions
ATO ID 2002/922

Keywords
Capital Gains Tax
CGT small business relief
Net income of trust
Receivers & managers
Receivership
Trust assets
Trustees
Unit trusts

Business Line:  Losses and Capital Gains Tax Centre of Expertise

Date of publication:  22 August 2003

ISSN: 1445-2782

history
  Date: Version:
You are here 30 July 2002 Original statement
  12 March 2010 Archived

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