• Internal Code :
  • Subject Code :
  • University :
  • Subject Name : Taxation Law

Case Study: Edwin

Conditions for availing CGT Concessions

According to the small business entity, CGT Concessions rules[1], a small business is entitled to certain CGT concessions concerning the sale of an active asset by it. A business entity shall be regarded as a small business entity for these concessions only if its aggregate annual turnover including the turnover of its connected entities [2]is not more than $ 2 million. This is the first condition that must be tested to determine if an entity is eligible to claim small business entity CGT Concessions.

Other conditions

All of the following conditions must be satisfied:

  • The asset must be an active asset [3]i.e., it must have been used by the business or kept ready for use by the business for a minimum of 7.5 years, if it was owned for over 15 years or a minimum of half of the test period, if it was owned for 15 years or less.
  • The net assets owned by the small business entity should not exceed $ 6 million [4](this does not include personal assets of the assessee or the small business entity owner which are not used for income-producing activities)

Clarification on Connected Entities to Determine Aggregated Turnover

The rule for determining whether two entities are connected entities or not is that one of these two conditions provided below must be satisfied

  • Either the small business entity controls another entity (40% or more voting power)
  • The entity and any other entity are controlled by a third entity which has a common control over both the entities.

CGT Concessions that Are Available

If all the conditions described above are satisfied, then an entity is eligible to claim the following small business entity concessions:

15-year exemption [5]– This can only be claimed if the business has owned the asset for a continuous period of 15 years and the age of the assessee is at least 55 years or the assessee has retired or become permanently incapable of performing his business and other activities. No capital gain shall be applicable if these conditions are met.

50% active asset reduction- Under this concession, the assessee is entitled to get a 50 percent reduction in the capital gains related to an active asset.

Retirement exemption – under this concession, the capital gains related to an active asset are exempt from tax up to a limit of $500000 which can be claimed once during the entire lifetime.

Rollover – These concessions allow the business entity to defer some or all of their capital gain for 2 years or more.

Determination of Edwin’s Entitlement to Above Concessions

To determine whether Edwin can claim the above-mentioned CGT concessions in respect of capital gain made by him on sale of his consultancy practice, it will have to be tested that whether he fulfills the above conditions:

  • As Edwin owns more than 40% shares in Edwin Pty Ltd, it shall be regarded as a connected entity for Edwin. Hence, the Aggregated Annual Turnover for Edwin would be equal to $ 2.05 million (1.85million + 0.2 million for EPL's turnover). As the aggregated turnover is more than $ 2 million, it cannot be considered a small business entity.
  • Edwin’s practice is an active asset and has been owned by Edwin since July 2005.
  • The value net assets owned by Edwin is equal to $2.4 million (calculations are provided below), which is less than $ 6 million

Assets

$ million

Assets of EPL

$ 1.00

Edwin's Shares in EPL

$ 0.45

vacant land in Byron Bay

$ 1.20

 

$ 2.65

Less: Borrowings

$ 0.25

Net Assets

$ 2.40

Conclusion:

Edwin is not entitled to claim small business CGT concessions as he does not qualify as a small business entity.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Taxation Law Assignment Help

Get It Done! Today

Applicable Time Zone is AEST [Sydney, NSW] (GMT+11)
Not Specific >5000
  • 1,212,718Orders

  • 4.9/5Rating

  • 5,063Experts

"

5 Stars to their Experts for my Assignment Assistance.

There experts have good understanding and knowledge of university guidelines. So, its better if you take their Assistance rather than doing the assignments on your own.

What you will benefit from their service -

I saved my Time (which I utilized for my exam studies) & Money, and my grades were HD (better than my last assignments done by me)

What you will lose using this service -

Absolutely nothing.

Unfortunately, i had only 36 hours to complete my assignment when I realized that it's better to focus on exams and pass this to some experts, and then I came across this website.

Kudos Guys!

Jacob

"

Highlights

  • 21 Step Quality Check
  • 2000+ Ph.D Experts
  • Live Expert Sessions
  • Dedicated App
  • Earn while you Learn with us
  • Confidentiality Agreement
  • Money Back Guarantee
  • Customer Feedback

Just Pay for your Assignment

  • Turnitin Report

    $10.00
  • Proofreading and Editing

    $9.00Per Page
  • Consultation with Expert

    $35.00Per Hour
  • Live Session 1-on-1

    $40.00Per 30 min.
  • Quality Check

    $25.00
  • Total

    Free
  • Let's Start

Get
500 Words Free
on your assignment today

Browse across 1 Million Assignment Samples for Free

Explore MASS
Order Now

Request Callback

Tap to ChatGet instant assignment help

Get 500 Words FREE
Ask your Question
Need Assistance on your
existing assignment order?