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Determining Capital Gains Tax Liability for Sale of Business and Receipts from Restrictive Covenant

Melanie owns a large supermarket in Paddington, Sydney and operates it as a sole trader. The assignment requires a 1000-word analysis of the small business concessions applicable to Melanie's supermarket.

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Added on  2023-01-04

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This document discusses the capital gains tax liability for the sale of a business and receipts from a restrictive covenant. It explains the rules, application, and eligibility for the small business CGT concession. The document provides insights into the conditions, exemptions, and concessions available for taxpayers. It also includes a calculation of net capital gains or loss. References to relevant taxation law resources are provided.

Determining Capital Gains Tax Liability for Sale of Business and Receipts from Restrictive Covenant

Melanie owns a large supermarket in Paddington, Sydney and operates it as a sole trader. The assignment requires a 1000-word analysis of the small business concessions applicable to Melanie's supermarket.

   Added on 2023-01-04

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Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID
Determining Capital Gains Tax Liability for Sale of Business and Receipts from Restrictive Covenant_1
TAXATION LAW1
Table of Contents
Answer to question 1:.................................................................................................................2
Issues:.....................................................................................................................................2
Rule:.......................................................................................................................................2
Application:............................................................................................................................3
Conclusion:............................................................................................................................5
References:.................................................................................................................................6
Determining Capital Gains Tax Liability for Sale of Business and Receipts from Restrictive Covenant_2
TAXATION LAW2
Answer to question 1:
Issues:
The current issue is based on determining the capital gains tax liability for the sale of
business and receipts that is obtained from entering into the restrictive covenant by the
taxpayer.
Rule:
According to the ATO under “Dividend 152” a small business will be considered eligible
for the capital gains tax concession on the assets that are used to perform business1. These
assets are usually treated as the active assets and the threshold turnover for the CGT
concession is $2 million. There four type of concession includes the following;
a. 15-year exemption under - subdivision 152-B
b. 50% active asset reduction - subdivision 152-C
c. Retirement exemption - subdivision 152-D
d. Rollover - subdivision 152-E
At the time of selling the active assets, the taxpayers are permitted to obtain
concession if the below conditions are met;
a. The total turnover is not less than $2.6 million
b. Assets should be fully used for business purpose
c. The value of net asset must not be greater than $6 million2.
1 Woellner, Robin, et al. "Australian Taxation Law 2016." OUP Catalogue (2016).
2 Robin, H. Australian Taxation Law 2019. Oxford University Press, 2019.
Determining Capital Gains Tax Liability for Sale of Business and Receipts from Restrictive Covenant_3

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