To qualify for the small business CGT concessions, you must satisfy several conditions that are common to all the concessions. These are called the ‘basic conditions’ are contained in subdivision 152-A – Income Tax Assessment Act 1997.
Each concession also has further requirements that you must satisfy for the concession to apply, except for the small business 50% active asset reduction, which applies if the basic conditions are satisfied.
Follow the steps below to determine whether you satisfy the basic conditions:
Step 1
You must first satisfy one of the following:
- you are a small business entity
- you do not carry on business (other than as a partner) but your CGT asset is used in a business carried on by a small business entity that is your affiliate or an entity connected with you (passively-held assets)
- you are a partner in a partnership that is a small business entity, and the CGT asset is
- an interest in a partnership asset (partnership assets) or
- an asset you own that is not an interest in a partnership asset (partner's assets) which is used in the business of the partnership
- you satisfy the maximum net asset value test.
Step 2
The asset in question must satisfy the active asset test.
Step 3
This step is only applicable if the CGT asset is a share in a company or interest in a trust. Where this is the case, one of these additional basic conditions must be satisfied just before the CGT event:
- the entity claiming the concession must be a CGT concession stakeholder in the company or trust, or
- CGT concession stakeholders in the company or trust together have a small business participation percentage in the entity claiming the concession of at least 90% (the 90% test).