Taxation Law Assignment: CGT Concessions for Small Business Owners

This taxation law assignment delves into the complexities of Capital Gains Tax (CGT) concessions available to small businesses in Australia. The assignment addresses the issue of whether a taxpayer is eligible to claim these concessions, outlining the relevant rules and regulations as defined by the Australian Taxation Office (ATO). It explores the four types of concessions, including the 15-year exemption, 50% reduction, retirement capital gains exemption, and roll-over relief, and their applicability based on specific criteria such as business turnover and asset value. The assignment then applies these rules to a case study involving a taxpayer named Michael, analyzing his eligibility for the small business CGT concessions, particularly the retirement exemption. The analysis considers the valuation of assets, including depreciating assets, and the implications of balancing adjustments. The conclusion affirms Michael's potential eligibility for the small business concession under subdivision 152-D, enabling him to reduce capital gains to zero. The assignment references key sources like Barkoczy, Morgan, Sadiq, and Woellner to support the analysis.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Answer to question 1:.................................................................................................................2
Issues:.....................................................................................................................................2
Rule:.......................................................................................................................................2
Applications:..........................................................................................................................3
Conclusion:............................................................................................................................3
References:.................................................................................................................................4

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Answer to question 1:
Issues:
Is the taxpayer allowed to claim capital gains tax exemptions and rollovers that are
available under the small business CGT concessions?
Rule:
According to the Australian Taxation Office, together with the capital gains tax
exemption and rollovers that are available more widely, there are four types of concessions
which allows the taxpayer to ignore or defer some or full amount of the capital gains from the
active asset that is used in the small business. As defined under the “section 152-35 and 152-
40” a CGT assets that meets the active asset test is eligible for four concessions (Woellner et
al. 2016). Under “section 152-10 & 152-15” Capital gains tax is available to any business
taxpayer that has the net value of capital gains tax asset is not greater than $6 million
(Barkoczy 2016). The small business concession includes the following;
a. 15-year exemption under subdivision 152-B
b. 50% reduction in capital gains tax under subdivision 152-C
c. Retirement capital gains exemption under the subdivision 152-D
d. Roll-over relief asset replacement under the subdivision 152-E
The above stated concession are available to the taxpayers when they dispose the
active asset and any of below stated conditions are met;
a. The taxpayer small business has the aggregate yearly turnover of not less than $2
million
b. The asset was entirely used and connection to small business
c. The taxpayer has the net asset of not greater than $6 million

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As per the Australian taxation office, an individual taxpayer when disposes the
depreciating asset, then they are required to make the balancing adjustment to consider the
differences between the adjusted value and the termination value. The taxpayer is required to
either include the amount in their assessable income or can be claimed as income tax
deduction.
Applications:
Michael under “section 152-10 and 152-15” is allowed to claim a small business
CGT concession (Sadiq 2018). The total market value of the asset is found be less than 6$
million. Michael also reported fittings and fixture with the written down value of $120,000.
Additionally, the building premises has the current market value of $500,000. However, upon
disposing the depreciating asset both the furniture and fixture as well as building should be
taken into account for CGT purpose based on their adjustable value after considering the
balancing adjustment.
Michael can claim exemption from the capital gains of sale of active asset under
“Subdivision 152-D” of the “Retirement Exemption” since he is presently below the age of
55 years (Morgan, Mortimer and Pinto 2018). Michael should pay the exempted amount into
the complying superannuation or retirement funds. With respect to “subdivision 152-D”, the
trading stock and the goodwill is eligible for exemption under small business concession
from capital gains. Michael can claim the Retirement exemption for the assets because
Michael has used the asset closely for his business and the net asset value is not greater than
$6 million.
Conclusion:
On a conclusive note, Michael can apply the small business concession under
“subdivision 152-D” until the capital gains can be reduced to zero.

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References:
Barkoczy, S., 2016. Foundations of taxation law 2016. OUP Catalogue.
Morgan, A., Mortimer, C. and Pinto, D., 2018. A practical introduction to Australian
taxation law 2018. Oxford University Press.
Sadiq, K., 2018. Australian Tax Law Cases 2018. Thomson Reuters.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian Taxation
Law 2016. OUP Catalogue.