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TAXATION LAWS AMENDMENT ACT (NO. 7) 2000 NO. 173, 2000 - SCHEDULE 3

- CGT small business provisions

Income Tax Assessment Act 1997

1 Subsection 116-30(1) (note)

Omit "section 138-30", substitute "sections 138-30 and 139-20".

2 At the end of paragraph 152-10(1)(a)

Add:

Note: This condition does not apply in the case of CGT event D1: see section 152-12.

3 At the end of paragraph 152-10(1)(d)

Add:

Note: This condition does not apply in the case of CGT event D1: see section 152-12.

4 Subsection 152-10(4)

Omit "This Division, apart from Subdivision 152-E, does not apply", substitute "Subdivisions 152-B and 152-C do not apply".

5 After section 152-10

Insert:

(1) Paragraphs 152-10(1)(a) and (d) do not apply in the case of * CGT event D1.
(2) Instead, it is a basic condition that the right you create that triggers the * CGT event must be inherently connected with a * CGT asset of yours that satisfies the active asset test (see section 152-35).
6 Subparagraph 152-15(a)(iii)

After "affiliates" (second occurring), insert "(not counting any assets already counted under subparagraph (ii))".

7 Subsection 152-20(3)

Repeal the subsection, substitute:

(3) Subsection (4) applies in working out the net value of the CGT assets of an entity that is:

(a)
your * small business CGT affiliate; or

(b)
* connected with your small business CGT affiliate.

(4) Disregard assets of that entity that are not used, or held ready for use, in the carrying on of a * business (whether alone or jointly with others) by:

(a)
you; or

(b)
an entity * connected with you (unless the connection with you is only because of your * small business CGT affiliate).

Example: You and your husband decide to sell a florist's business that you jointly carry on. Your husband also wholly owns a company that carries on a newsagency business. You yourself have no other involvement with the newsagency business.

You need to work out whether you satisfy the maximum net asset value just before the sale. For this purpose, you disregard the newsagency company's assets. This is because, even though the company is "connected" with you, in that your small business CGT affiliate (ie your husband) owns it (see section 152-30), this connection arises only because your husband controls the company.

8 Subsection 152-45(1) (heading)

Repeal the heading, substitute:

Asset compulsorily acquired, lost or destroyed

9 Subsection 152-115(1) (heading)

Repeal the heading, substitute:

Asset compulsorily acquired, lost or destroyed

10 Subsection 152-125(1)

Repeal the subsection, substitute:

(1) This section applies if:

(a)
under section 152-110, a * capital gain of a company or trust is disregarded; or

(b)
under section 152-110, an amount of income is treated as neither assessable income nor * exempt income of the company or trust; or

(c)
paragraph (a) of this subsection would have applied to an amount except that the * capital gain was disregarded anyway because the relevant * CGT asset was * acquired before 20 September 1985.

In this section, that amount is called the exempt amount .

11 At the end of Subdivision 152-C

Add:

You may choose not to apply the reduction mentioned in section 152-205 to a particular * capital gain.

Note: Making this choice might allow a company or trust to make larger tax-free eligible termination payments under the small business retirement exemption: see section 152-325.

12 Paragraph 152-305(1)(b)

Omit "(disregarding section 103-10)".

13 Subsection 152-325(4)

Repeal the subsection, substitute:

(4) In working out those * capital proceeds, disregard the market value substitution rule (see section 116-30).
14 Subsection 152-325(7)

Omit "(disregarding section 103-10)".

15 Paragraphs 152-425(1)(b) and (2)(b)

Omit "subsection 104-190(1)", substitute "section 104-190".

New Business Tax System (Capital Gains Tax) Act 1999

16 Item 61 of Schedule 1

Omit "if a CGT event happens", substitute "but only for CGT events that happen".

17 Application of amendments

The amendments made by this Schedule apply to assessments for the income year including 21 September 1999 and all later income years, but only for CGT events that happen after 11.45 am, by legal time in the Australian Capital Territory, on 21 September 1999.


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