ATO Alert: Capital Losses, CGT Disposals and Small Business CGT Concessions

ATO Alert: Capital Losses, CGT Disposals and Small Business CGT Concessions

The Australian Taxation Office (ATO) has issued a noteworthy advisory focusing on specific aspects that are currently under scrutiny. This insightful alert provides valuable insights into areas that warrant your attention.

Capital Losses:

When it comes to capital losses, our clients should be attentive to the following scenarios that have attracted the ATO’s focus:

  • Instances of losses that appear disproportionate, inaccurate or miscategorised.
  • Situations where changes within a company during the loss year could affect its ability to satisfy the ‘continuity of ownership test’ or the ‘business continuity test’.
  • Capital losses result from non-arms-length transactions where market value substitution rules aren’t appropriately applied.
  • The creation of artificial capital losses to counterbalance capital gains, including manipulation of cost base through non-arm’s length transactions or generating losses solely for the purpose of offsetting gains via wash sales.
  • Incorrect application of capital losses or improper reclassification as revenue losses to offset taxable income.
  • Discrepancies between the information presented in the tax return and the CGT schedule.

CGT Disposals:

Our clients are encouraged to be mindful of the following aspects related to CGT disposals that have captured the ATO’s attention:

  • Reporting capital gains that fall short of ATO estimates derived from external data sources.
  • Fulfilment of CGT schedule lodgment obligations.
  • Correct application of CGT discount claims for companies (excluding life insurance companies).
  • Accurate handling of beneficiaries’ receipt of the discounted share of a capital gain from a trust.
  • Compliance with CGT rules for instances involving partial scrip for scrip roll-overs, ensuring ineligible considerations are not received.
  • Appropriately reporting high-value asset disposals, ensuring capital gains are correctly returned, and unsubstantiated losses are not claimed.
  • Precise adherence to CGT roll-over provisions.

Small Business CGT Concessions:

For those engaging with small business CGT concessions, it’s imperative to consider the following triggers that have piqued the ATO’s interest:

  • Adherence to the ‘small business entity test’ and ‘maximum net asset value test’.
  • Ensuring assets being disposed of meet the definition of an ‘active asset’.
  • Proper fulfilment of additional conditions when CGT asset involves a share or trust interest, which includes accurate identification of significant individuals and CGT concession stakeholders.
  • Prevention of restructuring primarily for the purpose of accessing small business CGT concessions.
  • Ensuring conformity with the specific conditions applicable to the chosen small business CGT concession type, such as not exceeding the $500,000 limit for the CGT retirement exemption.


Simmons Livingstone is dedicated to providing you with expert insights and strategies that navigate the intricacies of tax regulations. Stay informed, stay empowered. For further assistance or clarification on any of these matters, don’t hesitate to speak with your Simmons Livingstone advisor on 1800 618 800 or via email at

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