A taxpayer must meet additional conditions to access the small business capital gains tax (CGT) concessions for shares in a company or interests in a trust.
A taxpayer can apply the small business CGT concessions to lower or disregard their capital gain from the disposal of their CGT assets. If the CGT asset is a share in a company or interest in a trust, the additional conditions the taxpayer must meet are:
* The taxpayer must have carried on a business just before the CGT event if they do not meet the maximum net asset value test.
* The taxpayer must be a CGT concession stakeholder in the company or trust; or the CGT concession stakeholders in the company or trust must have a total small business participation percentage of at least 90% (the 90% test) in the taxpayer just before the CGT event.
* The company or trust in which the shares or interests are held must either be a CGT small business entity for the income year or meet the maximum net asset value test. The rules for determining whether an entity is connected with the company or trust for this purpose are modified.
* The share or interest must satisfy the modified active asset test which looks through to the activities and assets of the underlying entities. The asset of an underlying entity will only be an active asset if the underlying entity
– is a CGT small business entity for the income year or meets the maximum net asset value test; and
– is one in which the taxpayer has a small business participation percentage of at least 20% or is a CGT concession stakeholder.
Please visit the ATO website for additional information and for additional conditions if the CGT asset is a share or trust interest.