Issue 2 : 2008-09 Budget and CGT

Issue 2

2008-09 Budget and CGT CGT 30 June planning Consolidation regime 2008-09 improvement threshold What is income? Amendment of assessments for CGT Trust cloning CGT market value substitution rule Amounts misappropriated by employee or agent Default by borrower on unsecured note – no CGT event McNeil’s case amendments Wash sales Deferred purchase agreement warrants CGT STATUS REPORT

Scrip for scrip roll-over

It was announced in the 2008-09 Budget that the Government will modify the CGT scrip for scrip roll-over provisions for corporate restructures.  The modifications are to apply to arrangements entered into after 7.30 pm 13 May 2008 (AEST) and are designed to ensure that tax outcomes reflect the substance of the transaction and to prevent companies from gaining significant unintended tax benefits by restructuring.

This measure is replacing the former Coalition Government’s announced changes to the consolidation rules following certain CGT roll-overs, which caused significant disruption to the operation of Australia’s capital markets.  The Assistant Treasurer said that the private sector had been consulted in the development of the measure and genuine commercial transactions which have been on hold since the former Government’s announcement will now be able to proceed with certainty.

Further consultation with the private sector is to be conducted during the development of legislation to implement the proposal.

CGT small business reliefs

The Government also announced in the 2008-09 Budget that it will be proceeding with changes announced by the former Government that will increase access to the CGT small business reliefs for:

• taxpayers owning a CGT asset used in a business by a related entity;  and
• partners owning a CGT asset used in the partnership business.

The Budget papers state that, currently, the small business entity test does not cover business structures where the CGT asset is owned by an entity but is used in a related entity which carries on the business.  In addition, for partnerships, the small business entity test requires the taxpayer making a capital gain to be a partner in the partnership and for the asset to be an asset of the partnership.  This measure will allow these structures and assets to qualify for the CGT small business concessions.

These changes are to apply with effect from the 2007-08 income year.

Disclaimer
The material contained in this publication is of a general nature and is not advice. No representation or warranty is made as to its correctness. Readers must obtain their own professional advice before making any decisions as to their own or their clients’ affairs.

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