| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012778536839
Ruling
Subject: Small business capital gains tax concessions - 15-year exemption
Question
Will you be eligible to disregard any capital gain made on disposal/transfer of the property under the CGT 15-year exemption concession for small business?
Answer
Yes
This ruling applies for the following periods
Year ending 30 June 2015
The scheme commences on
1 July 2014
Relevant facts and circumstances
The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:
• Your private ruling application.
• Record of a telephone conversation with your agent.
You hold 50% of farm land which you purchased prior to 1990.
You have continuously operated a business on the land since acquisition.
The relative that owns the other half of the land operates a separate business on the land.
The land has not been used for any other purpose.
You have ceased your business.
You are now only engaged in small amounts of casual employment.
You are over 55 years of age.
You are not selling the land but you are considering transferring your ownership to a Family Trust as part of a transition towards your retirement.
The turnover for the business was under $2 million.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 152-10
Income Tax Assessment Act 1997 paragraph 152-105
Reasons for decision
Section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997) contains the basic conditions you must satisfy to be eligible for the small business CGT concessions. These conditions are:
• a CGT event happens in relation to a CGT asset of yours in an income year;
• the event would have resulted in the gain;
• you satisfy the maximum net asset value test; and
• the CGT asset satisfies the active asset test.
The small business 15-year exemption takes priority over the other small business concessions and the CGT discount. If the small business 15-year exemption applies, you entirely disregard the capital gain so there is no need to apply any further concessions. Further, you do not reduce the capital gain by any capital losses before you apply the 15-year exemption concession.
Subsection 152-105 of the ITAA 1997 provides that an individual can entirely disregard any capital gain if all of the following conditions are satisfied:
(a) you satisfy the basic conditions
(b) you continuously owned the CGT asset for the 15-year period ending just before the CGT event
(c) you are either:
i. 55 or over at the time of the CGT event and the event happens in connection with your retirement; or
ii. permanently incapacitated at the time of the CGT event.
In your case:
• you satisfy the basic conditions
• you have owned your share of the asset for over 15 years
• you are aged over 55
• you are proposing to transfer the land in connection with your retirement
Accordingly, you satisfy all the conditions necessary to be eligible for the small business 15-year exemption concession in relation to your share of the property.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
