Author: WilliamHu(Champion)Champion 11 Oct 2021The client has a company A holding a property (passive investment company, the property is the only asset and the rent is the only income). The property were leased by company B (connected entity, solely owned by the client) carrying on the hairdressing business as business premise for 15 years. Then, the property was lease to the unrelated third party as company B winded up in 2017. If the company A sells the property in 22FY, what is the implication for the eligibility to SBE CGT concessions? Eligibility is in the link below: https://www.ato.gov.au/Business/Small-business-entity-concessions/Concessions/CGT-concessions/ Step 1: You must be one of the following: a. a small business entity with an aggregated turnover of less than $2 million b. not carrying on a business (other than as a partner) but your asset is used in a closely connected small business (passively-held assets) c. a partner in a partnership that is a small business entity, and the asset is either - an interest in a partnership asset (partnership assets) - an asset you own that is not an interest in a partnership asset (partner's assets) but is used in the business of the partnership d. you satisfy the maximum net asset value test. Step 2: The asset satisfies the active asset test. In step 1, option a &d, can you please advise if: a. a small business entity with an aggregated turnover of less than $2 million can be used? Company A is a passive investment company leasing to a unrelated third party, so I reckon the aggregated turnover test cannot be used. Or, we can use it by including the turnover of company A and connected entities and affiliates? d. you satisfy the maximum net asset value test. We maybe use this test for eligibility if the net asset value for connected entities and affiliates is less than $6M? Step 2, The asset satisfies the active asset test. Can be met as the property was leased to a connected entity carrying business for 15 years >7.5 years?
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