Edited version of private advice

Authorisation Number: 1051874751966

Date of advice: 4 August 2021

Ruling

Subject: CGT retirement concession period

Question 1

Are you entitled to disregard any capital gain arising from the disposal of the land pursuant to section 152-105 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

We consider you meet the basic conditions contained in section 152-10 of the ITAA 1997 as you were a CGT small business entity in the year of the event and the asset was used in your business for more than 7.5 years. Additionally, in line with section 152-105(1)(d)(i) of the ITAA 1997, the Commissioner accepts the CGT event will occur in connection with your retirement. Although the reduction in hours occurred sometime after the CGT event, we accept there was a clear plan following the sale of the land.

Question 2

If the response to Question 1 is no, will the Commissioner grant additional time to make the choice to apply the small business retirement exemption pursuant to section 103-25 of the ITAA 1997?

Answer

Not applicable.

Question 3

If the response to Question 1 is no, will the Commissioner grant additional time to make the choice to apply the small business rollover pursuant to section 103-25 of the ITAA 1997?

Answer

Not applicable.

Question 4

If the response to Question 1 is no, will the Commissioner grant additional time to purchase a replacement asset?

Answer

Not applicable.

This ruling applies for the following period:

Year ending 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You operated a primary production business.

The land is used as resting paddocks and shelter.

The primary production business was conducted on land you acquired in 19XX for $XXX,000 and have continuously owned the land for the 15-year period. Holding costs of $XXX,000 have been added to the cost base for the land to the date of sale. The 15-year period ended in 20XX.

You were at least 55 years of age or older in 20XX.

You sold the land on which the primary production business was conducted and made a capital gain. At this point in time you were 55 or over and not permanently incapacitated. However, did not start the transition to retirement until settlement occurred in case the sale fell through.

You previously worked on average 50 hours per week in your primary production business and reduced your hours worked to 10 hours per week on average, demonstrating your transition to retirement.

The sale price of the land was $X million. A deposit of $XXX,000 was paid on signing the contract, with the remaining balance paid by instalments and a final balloon payment of $X million was paid at settlement in 20XX.

In 20XX, you entered into a new unrelated contract to purchase a property for $XXX,000 to which you paid a deposit of $XX,000 and balance of $XXX,000 at settlement in 20XX. You funded the replacement property using the proceeds of sale received to date from the sale of the land.

After settlement of the sale of the land, you have since reduced your hours, hired a manager to undertake the management of the new business and now have more of an oversight role in the primary production business to ease the physical strain as you transition to retirement.

The turnover from the primary production business was less than $X million in the 20XX financial year.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 108-5

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 section 152-105