Optimising the Small Business CGT Concessions: A Tactical Guide for Accountants – 6 program recorded webinar series

Program 1: Small Business CGT Concessions: Navigating the Eligibility Conditions

The small business CGT concessions can be a very generous tool to reduce or completely eliminate a capital gain on certain assets, if basic eligibility conditions are met. Whilst the 1997 Tax Act defines the eligibility conditions as “basic”, this session explores the complexities that can arise before you can actually get to the point of being eligible to choose which of the 4 CGT small business concessions can be applied, including:

• How to determine if an entity is a CGT small business entity, including:
  • how “aggregated turnover” is calculated
  • how to determine which entities are “connected entities” and “affiliates” (TD 2023/D2)
  • the relevance of distributions from prior years when the “connected entity” is a discretionary trust
• What to include and exclude for the maximum net asset value test, including:
  • whether the actual selling price of an asset is the value to use for the test (Miley v C of T [2019] AATA 5540)
  • which liabilities can reduce the value
  • how investment properties, holiday homes and financial instruments are treated
• Managing the burden of proof for the maximum net asset value test
• How the basic conditions are extended for passively held assets
• When the basic conditions require identifying:
  • a CGT concession stakeholder
  • a small business participation percentage
• Practical examples

Program 2: Not All Assets are Eligible for the Small Business CGT Concessions – They Do Need to be “Active”

One of the basic conditions to be eligible for the CGT small business concessions is that the relevant asset satisfies the active asset test. This session takes a closer look at the complexities of this requirement, including:

• Assets that are specifically excluded from being active assets
• How assets are treated when their “main use” is to derive rent, including:
  • the treatment if a property is owned in a company (TD 2021/2)
  • how “rent” is defined for the active asset test (TD 2006/78)
  • how holiday homes, airbnbs and mixed use properties are treated
• How is “main use” being interpreted for the active asset test?
• The treatment of CGT assets owned by one entity and used by another related entity
• The types of intangible assets that may be considered to be active assets
• How the test applies to partnerships
• Practical examples

Program 3: Eligibility for CGT Small Business Relief – Not So Basic When It Comes to Shares and Trust Interests

The basic conditions for eligibility to the CGT small business concessions are modified if the CGT asset is a share in a company or an interest in a trust. This session highlights why those additional “basic” conditions could have easily been renamed additional “complex” conditions, including:

• The additional basic conditions specifically applying to shares in companies and interests in trusts, including:
  • practical guidance on the 80% test
  • applying the “modified active asset test”
  • how the rules apply where a company or trust owns an interest in other entities (TD 2006/65)
• How the “connected entity” requirements are modified for shares and trust interests
• Does the holder of the share or trust interest need to be a business taxpayer?
• Calculating the direct and indirect small business participation percentages for:
  • companies
  • trusts
• Case study

Program 4A: The Basic Conditions are Ticked Off – Now Which Concessions Will I Use? (Part A)

Once satisfied that the basic conditions for CGT small business relief are satisfied, the next step is to determine which of the four concessions should be applied to the CGT event. This two-part session explores the key features of the various concessions and how to best determine which may apply, including:

• The small business 15 year exemption:
  • when the “significant individual” requirement applies
  • how to apply if the CGT asset is a share in a company or an interest in a trust
  • timing requirements for payments from a company and trust
  • practical examples of the “in connection with retirement” requirement
• The small business 50% active asset reduction:
  • interaction with the 50% discount
  • when it may be prudent not to use
• The small business retirement exemption:
  • how it applies to individuals, companies and trusts
  • payment requirements
• The small business CGT rollover:
  • the distinction between other CGT rollovers it may be confused with
  • accounting for CGT events J2, J5 and J6
  • situations that may benefit from using this concession

Program 4B: The Basic Conditions are Ticked Off – Now Which Concessions Will I Use? (Part B)

Part B of this two-part session explores how the various concessions can be effectively utilised for maximum impact. Through practical case studies, it explores the key strategies accountants need to consider, including:

• When it may be prudent to use the CGT rollover concession as a deferral for later use of the CGT retirement exemption
• Practical examples of priority of use of concessions to maximise tax benefits
• Case studies exploring how payments into superannuation as a result of using the relevant concessions, interacts with the super capital gains tax lifetime caps
• How the use of the concessions can affect subsequent payments from companies and trusts, including:
  • which amounts may ultimately be subject to tax as dividend payments
  • whether payments can trigger CGT event E4 for trusts and G1 for companies

Program 5: Accessing Small Business CGT Concessions in a Trust

Practitioners don’t need to be reminded that trusts have their own unique tax features that seem to be attracting ever increasing scrutiny from the ATO. Therefore, when it comes to the significant tax benefits that a trust may avail itself to by using the small business CGT concessions, it is imperative that the use of the concessions be able to stand up to the possibility of rigorous scrutiny. This session explores the issues applicable to a trust’s use of the concessions, including:

• The maximum net asset value test and the treatment of unpaid present entitlements to a beneficiary connected with a trust (TR 2015/4)
• How are the concessions applied for a trust that owns and disposes of interests in other entities ((TD 2006/65)?
• Determining if a trust has a CGT concession stakeholder and calculating the direct and indirect small business participation percentage:
  • in a fixed trust (ID 2015/8)
  • in a discretionary trust (ID 2012/99)
• How to apply the small business 15 year exemption to trusts
• How to apply the small business retirement exemption to trusts
• Impact on company beneficiaries receiving trust distributions that include the 50% discount and the small business 50% active asset reduction
• Considering the small business CGT concessions as a restructure option from trust to company to cater for purchaser preference
• Case study – comparison of a business sale, from satisfying the basic conditions to distributing the sale proceeds, for:
  • a fixed trust
  • a discretionary trust