The AAT has held that a taxpayer had not passed the maximum net asset value test for the purposes of the CGT small business concessions in respect of a capital gain of $3.4m made on selling shares to his family trust.
This was because a liability incurred, in respect of a related loan of $1.4m made to the family trust, was secured by way of assets owned by another related company, and not assets owned by the company whose assets were to be taken into account under the maximum net asset value test just before the relevant CGT event.
In short, the AAT found that the maximum net asset value test required a relationship to exist between the liabilities and assets of the entity in issue, not any assets held by other connected entities, and that as a result, the liability for the loan in this case could not be taken into account.
At the same time, the AAT confirmed the shortfall penalties imposed for failing to take reasonable care as it said that, at relevant times, the taxpayer was aware of the correct authority on the issue (namely, FCT v Byrne Hotels QLD Pty Ltd [2011] FCAFC 127) which he contended was wrong.
(AAT Case [2012] AATA 219, Re Phillips and FCT, AAT, Ref No 2010/1395, Allen SM, 17 April 2012.)
[LTN 74, 19/4]