Changes to the CGT concessions for small business over recent years have improved access and made it easier for you to work out whether you are eligible for the concessions. You can read more about the most recent amendments in the Tax Laws Amendment (2011 Measures No. 9) Act 2012, which received Royal Assent on 21 March 2012.
The amendments generally apply to CGT events that happened from 2006–07 onwards. We will refer to these as the March 2012 amendments in this guide. These are discussed in detail in the Advanced guide to capital gains tax concessions for small business 2013–14. The amendments involve the following changes to the calculation of an entity's small business participation percentage:
- the voting power calculation for joint owners of shares has been removed
- an entity's small business participation percentage in a discretionary trust may be greater than zero, where the trust did not make a distribution during the CGT event year, because it had a tax loss or no net income for the relevant year.
As the March 2012 amendments are retrospective, you have additional time to amend your tax return to take advantage of the amendments where the original assessment was made before these amendments applied (22 March 2012, the day after royal assent). You have until the later of:
- 22 March 2014, or
- a later date allowed by the Commissioner of Taxation.
Other amendments are contained in Tax Laws Amendment (2009 Measures No.2) Act 2009External Link which received Royal Assent on 23 June 2009.
The changes apply to:
- payments and CGT events happening on or after 23 June 2009
- CGT events happening in 2006–07, 2007–08 and later income years.
We have incorporated these changes into this publication, where relevant.
The amendments that apply to payments and CGT events happening on or after 23 June 2009 involve changes to:
- enable certain liabilities to reduce an entity’s net asset value in applying the $6 million maximum net asset value test
- ensure that you consider all uses of an asset (except certain personal uses and certain uses from which passive income is derived) to work out what its main use is
- the way the retirement exemption works to remove unintended consequences by
- making sure the retirement exemption caters for CGT-exempt payments flowing through small business structures involving interposed entities
- excluding small business retirement exemption payments you made to CGT concession stakeholders from the deemed dividend provisions of section 109 and Division 7A section 109C of the Income Tax Assessment Act 1936.
Other amendments were announced in the 2008 Budget that apply to CGT events happening in 2007–08 and later income years. The changes increase access to the CGT concessions for businesses with turnover of less than $2 million using the small business entity test, for:
- taxpayers owning a CGT asset used in a business by an affiliate or connected entity (passively-held assets)
- partners who own a CGT asset used in the partnership business (partner's assets).
Other minor changes improve the way the concessions work by:
- increasing the circumstances and purposes for which a spouse or child under 18 years is taken to be an individual’s affiliate
- removing unintended consequences for the retirement exemption by correcting the treatment of capital proceeds received in instalments.
Other changes introduced in the June 2009 amendments apply retrospectively for CGT events happening in 2006–07 and later income years, and mean:
- if you are a joint tenant or a trustee of a testamentary trust, you may be able to access the concessions where
- a gain arises from an asset within two years of the individual’s death, and
- the deceased would have been entitled to the concessions
- you do not have to meet the basic conditions for the retirement exemption where you have not met the replacement asset conditions for the small business rollover (CGT events J5 and J6).
As the 2006–07 and 2007–08 changes are retrospective, you have additional time to make your choice to use the concessions where you become eligible as a result of the June 2009 amendments. The extra time to make a choice applies to CGT events happening before 23 June 2009.
You have until the later of:
- the day you lodge your tax return for the income year in which the relevant CGT event happened
- 23 June 2010
- a later date allowed by the Commissioner.
Find out more:
- Capital gains tax (CGT) concessions for small business – more changes for the 2007–09 years.
Changes to tax laws
Certain consequential amendments have also been made to the retirement exemption by the Superannuation Legislation Amendment (Simplification) Act 2007. These apply to the 2007–08 and later income years.
The effect of these changes on the retirement exemption mean that:
- a payment you make under the retirement exemption is no longer an eligible termination payment (ETP) or taken to be an ETP
- you do not have to report the payment for reasonable benefit limit (RBL) purposes.
ETPs and RBLs were abolished from 1 July 2007.
The government also made changes to the law in the Tax Laws Amendment (Small Business) Act 2007 to make it easier for you to claim tax concessions from 1 July 2007.
If your aggregated turnover is less than $2 million a year, you are eligible to claim a range of tax concessions. This includes the capital gains tax concessions for small business.
The changes also mean that if your turnover is $2 million or more, you can access the capital gains tax concessions for small business if you meet the maximum net asset value test. The threshold for this test has increased to $6 million. However, you must meet certain conditions.
These changes:
- became law in June 2007
- apply to CGT events in the 2007–2008 and later income years
- are included in this guide.
Find out more:
- eligibility and the concessions available to small business entities, go to ato.gov.au/sbconcessions
- how the changes specifically affect the CGT concessions, see Changes to the capital gains tax (CGT) concessions for small business 2007–08.