Tax Laws Amendment (2009 Measures No. 2) Act 2009 (42 of 2009)

Schedule 2   CGT concessions for small business

Part 1   Main amendments

Income Tax Assessment Act 1997

14   After section 152-45

Insert:

Treatment of passively held CGT assets

152-47 Spouses or children taken to be affiliates for certain passively held CGT assets

(1) This section applies if:

(a) one entity (the asset owner ) owns a *CGT asset (whether the asset is tangible or intangible); and

(b) either:

(i) the asset is used, or held ready for use, in the course of carrying on a *business in an income year by another entity (the business entity ); or

(ii) the asset is inherently connected with a business that is carried on in an income year by another entity (the business entity ); and

(c) the business entity is not (apart from this section) an *affiliate of, or *connected with, the asset owner.

(2) For the purposes of this Subdivision, in determining whether the business entity is an *affiliate of, or is *connected with, the asset owner, take the following to be affiliates of an individual:

(a) a *spouse of the individual;

(b) a *child of the individual, being a child who is under 18 years.

(3) If an entity is an *affiliate of, or *connected with, another entity as a result of subsection (2), then the *spouse or *child mentioned in that subsection is, in addition, taken to be an affiliate of the individual for the purposes of this Subdivision, and for the purposes of sections 328-110 to 328-125 to the extent that they relate to this Subdivision.

Example: The spouse or child mentioned in subsection (2) is taken to be an affiliate of the individual for the purposes of working out which entities are affiliates of or connected with entities under section 152-48.

(4) To avoid doubt, subsection (2) applies:

(a) for the purposes of reducing or disregarding, under this Division, any *capital gain from any *CGT asset; but

(b) only while:

(i) a *spouse remains a spouse; or

(ii) a *child remains a child who is under 18 years.

152-48 Working out an entity's aggregated turnover for passively held CGT assets

(1) This section applies for the purposes of section 328-115 to determine whether an entity (the test entity ) is a *small business entity for the purposes of subsection 152-10(1A) or (1B).

(2) An entity (the deemed entity ) is taken to be an *affiliate of, or *connected with, the test entity (as the case requires) if:

(a) the deemed entity is an affiliate of, or connected with, the entity that owns the *CGT asset referred to in subsection 152-10(1A) or (1B); and

(b) the deemed entity is not (apart from this section) an affiliate of, or connected with, the test entity.

(3) If:

(a) the entity that owns the *CGT asset referred to in subsection 152-10(1B) is a partner in 2 or more partnerships; and

(b) the asset is:

(i) used, or held ready for use, in the course of carrying on a *business that is carried on by at least 2 of those partnerships; or

(ii) inherently connected with businesses that are carried on by at least 2 of those partnerships;

then, each partnership referred to in paragraph (b) that is not (apart from this section) *connected with the test entity is taken to be connected with the test entity.

152-49 Businesses that are winding up

(1) This section applies to an entity in an income year (the CGT event year ) if:

(a) a *business that the entity previously carried on (including in partnership) is being wound up in that year; and

(b) either:

(i) the asset was used, or held ready for use, in the course of carrying on the business at a time in the income year in which the business stopped being carried on; or

(ii) if the asset is an intangible asset - the asset was inherently connected with the business that was carried on at a time in the income year in which the business stopped being carried on.

(2) For the purposes of paragraphs 152-40(1)(a) and (b) as they apply for the purposes of paragraphs 152-10(1A)(d) and (1B)(e):

(a) the entity is taken to carry on the *business at a time in the CGT event year; and

(b) either:

(i) the *CGT asset is taken to be used, or held ready for use, in the course of carrying on the business at that time; or

(ii) if the asset is an intangible asset - the CGT asset is taken to be inherently connected with the business at that time.

Note: The entity might also be taken to be a small business entity in the CGT event year (see subsection 328-110(5)).