60 THE TAX INSTITUTE

APPLIED TAX

Capital G

ains Tax Fundam

entals

Activity 11

Richard is a partner in a partnership which carries on a smash repair business in premises acquired 10 years ago which is a partnership asset and is debt-free. The other partners are Sam and Fred and each partner has an equal interest. No partner is related to any other partner. The business of the partnership has declined due to competition and its gross annual income for the income year preceding the current year was $1.2 million. Richard owns valuable investment and farming properties worth $4.2 million ($500,000 debt) and public company shares worth $800,000. It is decided that the partnership will, in the current income year, sell the premises (for $4.8 million) and lease them back.

Required:Will Richard be able to claim the small business CGT concessions on the capital gain attributable to his share of the partnership premises?

Check your progress

Can you?

Calculate the amount of the capital gain or loss arising in relation to a CGT event

Apply the cost base rules

Determine capital proceeds

Identify basic CGT events and their relationship to CGT liability

Identify the 50 per cent discount and indexation for certain entities

Apply CGT to non-residents of Australia

Appreciate when an asset stops being a pre-CGT asset

Apply the small business CGT concessions

Explain rollover relief same asset and replacement asset rollovers (eg. rollovers to wholly-owned companies; assets compulsorily acquired, lost or destroyed; scrip for scrip rollover; marriage breakdown etc.)

Explain demerger rollover relief