small business

Tax law provides a number of concessions to reduce, or even eliminate, a capital gain made on an eligible asset that had been used in a small business. However, the rules can be tricky to apply in practice. In this case, a couple was able to convince the Administrative Appeals Tribunal (AAT) that it was the husband that controlled the relevant entity (a trust), and not their daughter, which meant the trust was able to access the concessions.


Tax law provides four concessions to reduce, eliminate, and/or to provide a rollover for a capital gain made on an eligible asset that has been used in a small business. These concessions include the “15-year exemption”, the “50% reduction”, the “retirement exemption”, and the “rollover” concession. The availability of the concessions is subject to satisfying a range of conditions. These rules can be tricky to apply in practice – and improperly claiming the concessions can have devastating consequences.

However, in one case before the Administrative Appeals Tribunal (AAT), a married couple was successful is arguing entitlement to the small business capital gains tax (CGT) concessions. The case involved a trust, in respect of which the husband and wife were beneficiaries. A key issue concerned the trust’s entitlement to the CGT concessions in connection with a capital gain made on the sale of assets by the trust in the 2008 income year. Specifically, the main issue was whether the trust was controlled, either alone or with others, by the couple’s daughter.

The Commissioner argued the daughter was a controller of the trust, and therefore the trust was connected with other entities controlled by the daughter, resulting in the trust breaching the eligibility requirements for the CGT concessions sought by the couple. However, the AAT found the husband alone was the person who controlled the trust for the purposes of the small business concessions. Therefore, entities connected with the daughter, who was found to be a mere “puppet director” of the company trustee, did not have to be taken into account in determining the trust’s entitlement to the concessions claimed by the couple. Among other things, the AAT found that the trust was not accustomed to acting in accordance with the daughter’s wishes independently of her father’s wishes in circumstances where her wishes and directions were actually her father’s.

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