Draft Taxation Determination

TD 92/D225

Income tax: capital gains: how is the 'net value' of a business determined for the purposes of section 160ZZR?

• Please note that the PDF version is the authorised version of this draft ruling.
  This document has been finalised by TD 93/2.

FOI status:

Preamble

1. For the purposes of section 160ZZR of the Income Tax Assessment Act 1936, 'net value' is a reference to the value of the assets of a business less the amount of liabilities of the business (paragraph 160ZZR(2)(b)).

2. The value of an asset is its market value and not its 'book value'.

Example:

On 1 July 1992, a taxpayer disposes of a business including goodwill.

At the date of disposal, the net assets of the business are recorded in the accounts (based on historical cost) at $2,200,000. The market value of the business assets is $2,600,000 while the liabilities of the business amount to $300,000.

The 'net value' of the business for the purposes of section 160ZZR is taken to be $2,300,000 i.e. $2,600,000 less $300,000.

As the 'net value' exceeds $2,000,000 (subsection160ZZRAA(2)), no relief can be provided by the section in respect of any capital gain accruing to the taxpayer on the disposal of the goodwill.

Commissioner of Taxation
26/11/92

References

ATO references:
NO ADVG CHERM

Subject References:
net value
market value
book value
business
disposal of goodwill

Legislative References:
ITAA 160ZZR
ITAA 160ZZR(2)(b)
ITAA 160ZZRAA(2)