Step 2 - Work out whether you qualify for the 15-year exemption
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 you do not need to apply any further concessions. There is no need to apply capital losses before you apply the 15-year exemption. This means you may use these capital losses to offset other capital gains.
If the capital gain is from a depreciating asset, you cannot use the 15-year exemption.
End of attention
Do you qualify?
You qualify for the small business 15-year exemption if you:
- meet the basic conditions for the small business CGT concessions, including the active asset test (in this case the asset must have been an active asset for at least 7.5 years during your period of ownership)
- continuously owned the CGT asset for the 15-year period ending just before the CGT event, where you are
- an individual in business and at the time of the CGT event you were 55 years old or older and the event was connected with your retirement, or you were permanently incapacitated
- an individual in business and your CGT asset is a share in a company or an interest in a trust and the company or trust had a significant individual, for periods totalling at least 15 years, during which the individual owned the shares or trust interests (not necessarily the same individual for the whole period), or
- a company or trust and the company or trust had a significant individual for at least 15 of the years they owned the asset (not necessarily the same individual for the whole period) and at the time of the CGT event, the significant individual was 55 years old or older and the event was 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.
From 1 July 2007, if you are contributing a 15-year exemption amount to a superannuation fund or retirement savings account (RSA), the amount is generally a non-concessional contribution. To exclude the amount from your non-concessional contributions cap and have it count towards your $1 million (indexed annually from 2007-08) superannuation CGT cap instead, you must notify the fund on the Capital gains tax cap election (NAT 71161). You must complete this election by no later than the time you make the contribution.
Example 7: small business 15-year exemption
Lana does not 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 $6 million.
Ruth and Geoff decide to retire as they are both over 60. 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 for the capital gain, they can disregard the entire gain. They do not need to apply any other concessions.
If you make a capital loss from the CGT event, you can use the loss to reduce other capital gains.
End of attention