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  • Step 2 Determine whether you qualify for the small business 15-year exemption

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    If you qualify for the small business 15-year exemption, you can disregard the capital gain entirely and don't need to apply any further concessions. There's no need to apply capital losses before you apply the 15-year exemption.

    Gains from depreciating assets: If the capital gain is from a depreciating asset, you can't use the 15-year exemption.

    Do you qualify?

    You qualify for the small business 15-year exemption if:

    • you satisfy the basic conditions for the small business CGT concessions (the asset must have been an active asset for at least half of the relevant 15-year period, not half of the full period of ownership)
    • you continuously owned the CGT asset for the 15-year period ending just before the CGT event, and  
      • where you are an individual in business, at the time of the CGT event you were 55 years or more and the event was connected with your retirement, or you were permanently incapacitated
      • where you are an individual in business and the CGT asset is a share in a company or an interest in a trust, the company or trust had a controlling individual for the entire time you owned the share or interest (not necessarily the same individual for the whole period), or
      • where you are a company or trust, the company or trust had a controlling individual for the entire time it owned the CGT asset (not necessarily the same individual for the whole period). Further, at the time of the CGT event the controlling individual must have been 55 years or more and the event must have been connected with their retirement, or they must have been permanently incapacitated.
       

    For CGT assets acquired or transferred under the rollover provisions relating to assets compulsorily acquired, lost or destroyed, or those relating to marriage breakdown, there are modified rules about the requirement that the asset be continuously owned for at least 15 years.

    Example: small business 15-year exemption

    Lana doesn't qualify for the small business 15-year exemption as she has owned the land for only three years. However, she does have a capital loss and may qualify for the CGT discount and one or more of the other small business CGT concessions.

    On the other hand, Lana's friends Ruth and Geoff do qualify for the exemption. They are partners in a partnership that conducts a farming business on land they purchased in 1986 and have owned continuously since that time. The net value of their CGT assets for the purpose of the maximum net asset value test is less than $5 million.

    Ruth and Geoff decide to retire as they are both over 60 years of age. They sell the land (the major asset of the farming business) in 2003 for a total capital gain of $100,000.

    As Ruth and Geoff qualify for the small business 15-year exemption in relation to the capital gain, they can disregard the entire gain. They don't need to apply any other concessions.

    End of example

    Losses: If you make a capital loss from the CGT event, you can use the loss to reduce other capital gains.

    More information:

    Last modified: 14 Jul 2020QC 17086