Taxation Law: Small Business Entity Concessions and CGT Relief

Running head: TAXATION LAW
Taxation Law
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TAXATION LAW1
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................2
Answer to question 3:.................................................................................................................3
Answer to question 4:.................................................................................................................4
Answer to question 5:.................................................................................................................4
Answer to question 6:.................................................................................................................5
Answer to question 7:.................................................................................................................6
Answer to question 8:.................................................................................................................6
Answer to question 9:.................................................................................................................7
Answer to question 10:...............................................................................................................7
References:.................................................................................................................................9

TAXATION LAW2
Answer to question 1:
For the purpose of taxation, the definition of the small business is reliant on the concept
of the small business entity. Based on this definition to be measured as the small business
entity in the relevant income year, the company should carry on the business during that year
and should satisfy the test of $2 million aggregate turnover (West & Lam, 2016). The
eligibility criteria that is used by the ATO for the small business entity concessions is that a
business primarily need to work out whether they are SBE throughout the income year. From
1st July onwards if a person operates as the sole trader, partnership, company or trust then
they will be treated as the SBE given that they are;
a. Functioning the business for all through the income year and
b. If the aggregate turnover of lower than $10 million
An individual that are carrying on the entity for the four CGT concessions if they are
considered as the individual sole proprietor, partnership, company or trust that is;
a. Performing the business activities
b. If they have the aggregate gross revenue of lesser than $2 million
Answer to question 2:
Favourable treatment is being given to SBE entity because the tax concession regime
is main bought into action to help the small business in lowering the burden of compliance
cost in satisfying their obligations associated to tax (Barry, 2016). SBE is given favourable
treatment due to the minimisation of tax for the clients. The probable reason for favouring
SBE tax concessions to not just simply to lower the tax compliance cost for the tax
practitioners but to provide the opportunity of lower the tax liability of the clients.

TAXATION LAW3
The government on the other hands does a preferential treatment of the small business
because the proprietors of the SBE may face the barriers of expanding the firms and majority
of the people have asserted that the small business sector is principally helpful in producing
growth and innovation (Evans et al., 2015). The government treats the SBE concessions in
preferential way because the tax policy creates an impact on the financing issues in two
principle manner. This includes the deduction of tax for the interest payments that are
considered very much normal operational portion of income tax and the preferential rate on
the capital gains that creates an impact on the capital gains and venture capital. In actual
practice the taxes effect both the demand supplies of the venture capital. The evidences
appear to suggest that the supply gets weakens however the demand effects are existent.
Answer to question 3:
The SBE concessions is considered very much significant because an entity that
satisfies the basic conditions given under “sec 152-10, ITAA 1997” will be able to avail wide
range of CGT concessions (Chardon et al., 2016). The significance of SBE is that capital
gains initiating from selling of the active assets is allowed for deduction by 50% and 100%. If
the entity meets the basic conditions, then a CGT relief is available. For this reason, the SBE
is considered significant because the taxpayer is permitted to use the CGT small business
provision that are given in “division 152 ITAA 1997” when their clients sells the active asset.
By applying the SBE concessions, the tax practitioners will be capable of successfully
reducing their liability of tax associated to CGT initiating from their disposal of client’s
business to $nil (Woellner et al., 2016). As one of the important role of the tax practitioners is
to structure their affairs of clients in a manner that their tax liability is lowered, it is not very
much surprising that the CGT concessions for the small business is viewed by the tax
practitioners as the most significant SBE tax concessions, mainly due to their ability of
reducing or minimising their tax to nil.