Tax Laws Amendment (2006 Measures No. 7) Act 2007 (55 of 2007)

Schedule 1   Small business relief for CGT events

Income Tax Assessment Act 1997

45   Sections 152-120 and 152-125

Repeal the sections, substitute:

152-120 Discretionary trusts need not have a significant individual in a loss year or nil income year

Paragraphs 152-105(c) and 152-110(1)(c) apply for a trust referred to in item 3 of the table in subsection 152-70(1) as if the trust had a *significant individual during an income year for which the trustee did not make a distribution of income or capital, if the trust had a *tax loss, or no taxable income, for that income year.

Note: This is because the trust might not have had the funds to make a distribution during that income year, which would prevent it from having a significant individual in that year.

152-125 Payments to company’s or trust’s CGT concession stakeholders are exempt

(1) This section applies if:

(a) one of the following applies:

(i) under section 152-110, a *capital gain (the exempt amount ) of a company or trust is disregarded;

(ii) under section 152-110, an amount of income (the exempt amount ) is *non-assessable non-exempt income of a company or trust;

(iii) subparagraph (i) of this paragraph would have applied to an amount (the exempt amount ) except that the capital gain was disregarded anyway because the relevant *CGT asset was *acquired before 20 September 1985; and

(b) the company or trust makes one or more payments (whether directly or indirectly through one or more interposed entities) in relation to the exempt amount within 2 years after the relevant *CGT event to an individual who was a *CGT concession stakeholder of the company or trust just before the event.

Note: A normal business payment, for example, a payment of wages, would not be made “in relation to the exempt amount”.

(2) In determining the taxable income of the company, the trust, the individual, or any of the interposed entities, disregard the total amount of the payment or payments made to the *CGT concession stakeholder, up to the following limit:

where:

stakeholder’s participation percentage means:

(a) in the case of a company or a trust referred to in item 2 of the table in subsection 152-70(1) - the stakeholder’s *small business participation percentage in the company or trust just before the relevant *CGT event; or

(b) in the case of a trust referred to in item 3 of that table - the amount (expressed as a percentage) worked out using the following formula:

100 / Number of CGT concession stakeholders of the trust just before the CGT event

(3) If a company makes such a payment, this Act applies to the payment, to the extent that it is less than or equal to the limit mentioned in subsection (2), as if:

(a) it were not a *dividend; and

(b) it were not a *frankable distribution.

(4) The Commissioner may extend the time limit under paragraph (1)(b).