If your client is a small business entity and their turnover is less than $2m then you do not need to consider the maximum net asset value test. However if they do not meet the definition of a small business entity then they must satisfy the maximum net asset value test which is currently $6 million.
This test will be satisfied, if just before the CGT event, the total of the following does not exceed $6 million
- the net value of the CGT assets of the taxpayer ;
- the net value of the CGT assets of any ‘connected entities’ of the taxpayer; and
- the net value of the CGT assets of any ‘affiliates’ of the taxpayer , or ‘connected entities’ of the taxpayer’s affiliates.
When determining whether this test has been satisfied the taxpayer can however exclude certain assets. These include
- the market value of the individual’s principal place of residence just before the CGT event. This also extends to any relevant adjacent land to the principal place of residence. There are some conditions and these will need to be assessed by your accountant.
- any assets solely used for the personal use and enjoyment of the individual or the individual’s affiliate. This excludes a principal place of residence because it has been accounted for already. The ATO has released a number of Interpretive Decisions as to what constitutes in their mind the definition of solely used. The following ATO ID’s discuss this issue.
| ATO ID 2011/39 CGT small business concessions: maximum net asset value test – disregarded assets – asset being used solely for personal use and enjoyment by spouse and children |
| ATO ID 2011/40 CGT small business concessions: maximum net asset value test – disregarded assets – asset being used solely for personal use and enjoyment – non-income producing use by others |
Omega Partners are able to assist with your outsourcing needs and our team are experienced in understanding and applying the small business concessions.