Newsletter
April 2013 Newsletter
Disposal date critical for CGT small business concessions
In a recent decision, the Administrative Appeals Tribunal (AAT) decided that a taxpayer’s interest in a business was disposed of when a “heads of agreement was executed”, and not when the formal contract of sale was executed.
An agent had testified that it was long-standing practice in the industry for an intending purchaser and vendor to enter into an “in-confidence” period of exclusivity during which the intending purchaser would use professional advisers to carry out due diligence.
Despite evidence suggesting that the industry did not regard the heads of agreement as a binding contract, the AAT was of the view that the parties to the heads of agreement had agreed to the sale and purchase of the business in question. As a result, as it was found that it was the date of the heads of agreement that was the applicable date of the transaction for CGT purposes.
As a result, the taxpayer was not entitled to access the CGT small business concessions because he did not satisfy the relevant test for the concessions just before that date.