The Commissioner argued that in applying the relevant provision, the tribunal ought to have included, but did not include, the value of the assets of Mrs Roberts in the calculation of the value of the company’s assets before the sale of the car wash.
The Commissioner contended that the tribunal erroneously limited its enquiry into whether Mrs Roberts herself beneficially owned shares in the company that carried the right to control the exercise of at least 40% of the voting power, whereas the tribunal ought to have considered whether Mrs Roberts’ small business CGT affiliate (her husband) owned shares in the company that carried between them the right to control the exercise of at least 40% of the voting power.
The Federal Court said the covering words in the relevant provisions of the tax law contemplated three bases upon which to determine the relevant connection between the company and another entity (in this case the wife). The court said the tribunal concluded that the relevant provision did not apply because the wife was not connected with the company although her husband was.
The tribunal did not, however, consider (but should have) whether the wife was deemed to be connected with the company by the same law which required that her connection be determined also by reference to her small business CGT affiliate (in this case, her husband) or together with her small business CGT affiliate (in this case, together with her husband).
The case highlights the inherent complexities in what should really be a relatively straightforward tax concession.
The small business CGT concessions are valuable to any SME and can result in significant tax savings. However, any SME contemplating claiming the concessions would be very well advised to seek professional advice. This is one piece of tax law that is crying out for simplification.
Terry Hayes is the editor-in-chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.
Terry Hayes is the editor-in-chief of tax news reporting at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.
