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    No small business CGT concessions because of fuel reimbursements


    In brief:    The Full Federal Court has held that there was no error by the AAT in concluding that the $2M turnover test had not been satisfied and that, consequently, no small business CGT concessions applied on the sale of mining tenements. The case turned on whether disbursements totalling $55,106 for fuel costs under 2 contracts constituted ‘*ordinary income that the entity *derives in the income year in the ordinary course of carrying on a *business.’ (s 328-120(1)). The AAT had held that receipts from fuel disbursements were ordinary income, despite the normal practice that customers of the drilling contractor provided fuel and the initial contracts for the 2 relevant drilling jobs required the customers to provide fuel.

    More:    The taxpayer’s drilling company was a ‘connected entity’ and had undertaken drilling exploration on the mining tenements from which the taxpayer derived the capital gain. And the Commissioner had accepted that the basic conditions for the small business CGT concessions would have been satisfied if the drilling company’s annual turnover had been less than $2M for the previous year of income. This case continues the steady stream relating to the small business CGT concessions and illustrates how important it is to step through each of the relevant tests for the concessions in fine detail. (Doutch v Commissioner of Taxation [2016] FCAFC 166)



    15 Dec 2016

    Topic: CGT/Income Tax

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