Eligibility for Concessional Balancing Charge on Cessation of Business

Is the taxpayer entitled to have a concessional rate of tax applied to a balancing charge under section 42-295 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes. The taxpayer is entitled to concessional treatment on the balancing charge that was included in assessable income as a result of the cessation of business under section 42-295 of the ITAA 1997.

The taxpayer was a trucking contractor who operated as a sole trader. The taxpayer ceased operations as a trucking contractor and sold the truck that was used in the trucking operations. The sale of the truck resulted in a balancing charge being included in the taxpayer's assessable income.

The taxpayer did not claim depreciation on the truck through a pool.

The taxpayer was not entitled to the averaging provisions available to primary producers and certain professionals.

The taxpayer did not receive balancing charge relief under sections 42-285 (same year relief), 42-290 (later year relief) or 42-293 (involuntary disposals) of the ITAA 1997.

Section 42-295 of the ITAA 1997 allows for a concessional rate of tax to be applied to a balancing charge that is included in assessable income provided that the balancing adjustment resulted from the cessation of a business carried on by the taxpayer and a balancing adjustment event, as defined in subsection 42-295(3) of the ITAA 1997, did not occur.

As the taxpayer's situation meets the requirements of section 42-295 of the ITAA 1997, the taxpayer will be entitled to have a concessional rate of income tax applied to the portion of assessable income which constitutes the balancing charge.