Maximum net asset test failed

21 September 2010

If you're thinking about selling your business, then you need to check that your eligibility for small business CGT concessions is correct. The ATO recently won an action against a small business at the AAT, by demonstrating that the company wasn't eligible for a 50% CGT discount because it failed the maximum net asset test.

The taxpayer had sought to apply the concessions to reduce their capital gain on the basis that this test was satisfied, however they had excluded $3.8m worth of loans made to related parties from their net asset calculation. Their claim that the loans were not CGT assets was dismissed, after the tribunal concluded that the loans were in fact CGT assets of the lender and needed to be taken into account.

Want to understand more about CGT and selling your business? Download our CGT factsheet here.

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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