The Administrative Appeals Tribunal (AAT) has ruled that the “market value” of a parcel of shares in a private company that a taxpayer sold in an arm’s-length transaction (together with the other two shareholders’ shares in the company) was not the proportion of the sale price he received from the sale of all the shares. Instead, the AAT agreed it was a discounted amount; the taxpayer was a “non-controlling” shareholder, so the market value was less than simply his one-third share of the sale price.
As a result of this AAT decision, the taxpayer passed the $6 million “maximum net asset value test”, allowing him to qualify for small business capital gains tax (CGT) concessions, where otherwise he would not have.
The Commissioner has appealed to the Federal Court against this AAT decision.
nImportant: Clients should not act solely on the basis of the material contained in Update. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. This update is issued as a helpful guide to clients and for their private information.