LIVINGSTON & LIVINGSTON

The parties in this matter were the applicants, Mr. and Mrs. Livingston, and the respondent, the Commissioner of Taxation. The dispute concerned the Commissioner's assessment of income tax against the Livingstons for the 2004 income year, specifically relating to a capital gain arising from the sale of shares in a company. The matter came before Young J in the Supreme Court of New South Wales.

The primary legal issue before the Court was whether the Livingstons were entitled to the small business capital gains tax (CGT) concessions, specifically the 50% reduction and the retirement exemption, in relation to the capital gain realised from the sale of their shares. This turned on whether the company, in which they held shares, qualified as a "small business entity" and whether the shares themselves constituted "active assets" for the purposes of the relevant CGT provisions.

Young J considered the definition of a "small business entity" and the criteria for an "active asset" under the *Income Tax Assessment Act 1997* (Cth). His Honour found that the company's turnover for the relevant income year exceeded the threshold for a small business entity. Furthermore, his Honour determined that the shares held by the Livingstons were not "active assets" as defined by the Act, as the company's principal business was not the carrying on of a small business. Consequently, the Livingstons were not entitled to the small business CGT concessions.

The Court therefore dismissed the Livingstons' appeal and affirmed the Commissioner's assessment.