The ATO has noticed some common errors occurring when taxpayers apply the small business CGT concessions, and has offered tips to help avoid those errors.
Satisfy the maximum net asset value test
Just prior to the CGT event, the total net value of the taxpayer's CGT assets cannot exceed $6 million.
This includes the net value of the CGT assets of any entity that is 'connected with' the taxpayer, is an 'affiliate' of the taxpayer, or who is connected with the taxpayer's affiliates.
Determine the market value of a business or asset
Where the market value is required, accepted valuation principles should be applied.
Use the contract date, not settlement date
The CGT event occurs at the time the contract is entered into, not at the settlement date. For disposals of assets, the time of the CGT event is when the disposal contract is signed.
Where contract and settlement dates cross over financial years, the capital gain or loss should be declared in the financial year in which the contract was signed.
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