n this case, the Taxpayer sold five childcare centres in December 2008, and made an assessable capital gain.

The AAT held that the Taxpayer failed the $6 million net asset value test for accessing the CGT small business concessions, under Division 152 of the Income Tax Assessment Act 1997. The issue was whether the Taxpayer was entitled to reduce a capital gain by application of the small business CGT concession in Division 152, by approximately $1.6 million.

The Taxpayer argued that he satisfied the test as:

  • there were 6 different liability amounts that should be taken into account to determine the net assets, which bring the net value below the sum of $6 million and
  • the purchaser paid a significant premium on the purchase price, above market value. The price agreed between the vendor and purchaser was not that which a willing purchaser would have had to pay to a vendor willing but not anxious to sell.

The case highlights the importance of ‘market value’ in these types of transactions where the small business concessions are relied on. Where the asset has been the subject of a recent arm’s length sale, it is generally unnecessary to hypothesise on market value. It is what a willing and knowledgeable, but not anxious purchaser, would pay a willing and knowledgeable, but not anxious vendor.

On each point, the AAT:

  • accepted four of the liabilities that were questioned, which reduced the values attributed to those respective assets by a total of $1.2 million and
  • determined that the Taxpayer failed to establish that the contract price was not the market price of the childcare centres. To do this it would have had to lead evidence that the price paid by the purchaser was wholly erroneous. The prima facie effect of the negotiated price was to show that the market price was the amount agreed to be paid by the purchaser, and the Taxpayer did not displace that prima facie position. Therefore the purchaser paid market value for the childcare centres.

The Commissioner’s decision was affirmed.