The Full Federal Court has confirmed that liabilities in respect of sales agent commissions and legal fees were proper liabilities that should be taken into account in calculating the Maximum Net Assets Value test in respect of the small business CGT concessions.
Timing of liabilities
The Commissioner had appealed against the Tribunal's decision arguing that these liabilities were not liabilities in respect of CGT assets sold just before the CGT event as required under s152-15. The Commissioner argued that these liabilities did not come into existence until after the event had occurred.
The taxpayer made a substantial gain on the sale of a hotel business, land and buildings and in determining whether they satisfied the maximum net assets value test, included the liabilities arising in respect of sales commissions and legal fees that were charged in executing and finalising the sale agreement.
The Commissioner argued that these were not liabilities which were in existence just before the CGT event.
The Full Federal Court in considering the real estate agent agreement noted that even though the there was no obligation to make payment until sometime in the future and after the sale was executed, the liability was not contingent on any other event save for the execution of the sale and
receipt of the proceeds.
The sales agent commission and legal fees were valid liabilities for the purposes of the test.
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Last updated January 2012. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.
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.