The AAT has confirmed that a taxpayer, a company that made a capital gain of over id=”mce_marker”m in selling its interest in a car wash business in the 2007-08 income year, did not satisfy the (then) $5m maximum net asset value (MNAV) test for the purpose of qualifying for the CGT small business concessions. In doing so, the AAT confirmed that the sole director and 50% shareholder in the taxpayer company (a Mr Roberts) was a connected entity to the taxpayer and therefore the MNAV of his assets were to be taken into account.
However, the Tribunal dismissed his argument that his 50% interest in a family holiday home should be disregarded as, just before the relevant CGT event, it was being used for “personal use and enjoyment”. Instead, the AAT found that although the property was “ready” for such personal use and enjoyment at the time (as it was no longer available for rent), it was not actually being used in that way at that point in time. Rather, the AAT found, in effect, that the home’s continual use as a rental property over the previous 7 years meant that, until it was once again used as a holiday home, it could not be regarded as “being used” for the director’s personal use and enjoyment.
Nevertheless, the AAT found that Mrs Roberts’ CGT assets, including her 50% interest in the holiday home, were not to be counted in applying the MNAV test because she was not connected with the taxpayer company as she did not own any shares in it. Furthermore, the AAT then found that although she was a “CGT small business affiliate” of Mr Roberts (as then relevant) by virtue of being his wife, she was neither a CGT small business affiliate of the taxpayer company and, therefore, the MNAV of her CGT assets were not to be counted. (AAT Case [2013] AATA 140, Re Alnot Pty Ltd and FCT, AAT Ref No 2011/4873, Forgie DP,15 March 2013.)
[LTN 64, 4/4/13]