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Edited version of your written advice
Authorisation Number: 1013073868602
Date of advice: 17 August 2016
Ruling
Subject: Capital gains tax
Question
Are you eligible to disregard any capital gain made on disposal of the property under the CGT 15-year exemption concession for small business?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2017
Year ended 30 June 2018
Year ended 30 June 2019
Year ended 30 June 2020
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You acquired a property more than 15 years ago.
You have a sole director and shareholder and they have been continuously involved for more than 15 years.
You have continuously owned the property for over 15 years.
The aggregated turnover of you and your related entities is less than $2 million.
Your sole director and shareholder, is selling the property as part of their retirement and is over 55.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 152-A
Income Tax Assessment Act 1997 Subdivision 152-B
Income Tax Assessment Act 1997 section 152-110
Reasons for decision
The rules covering the small business 15-year exemption are contained in Subdivision 152-B of the Income Tax Assessment Act 1997 (ITAA 1997).
If you qualify for the small business 15-year exemption you can entirely disregard the capital gain you make from the disposal of a capital gains tax (CGT) asset and do not need to apply any other concessions. In addition, you do not have to apply capital losses against your capital gain before applying the exemption.
Under section 152-110 of the ITAA 1997 a company can disregard the capital gain made on the disposal of a CGT asset if the company:
(a) satisfies the basic conditions for the small business CGT concessions in Subdivision 152-A of the ITAA 1997 for the gain
(b) continuously owned the CGT asset for the 15-year period ending just before the CGT event
(c) had a significant individual for a total of at least 15 years (even if it was not the same significant individual during the whole period) during which the company owned the CGT asset, and
(d) an individual who was a significant individual of the company just before the CGT event either:
(i) was 55 or over at that time and the event happens in connection with the individual's retirement, or
(ii) was permanently incapacitated at that time.
In your case, the basic conditions contained in Subdivision 152-A of the ITAA 1997 will be satisfied because:
• a CGT event will occur when you dispose of the property
• the event will result in a gain
• you are a small business entity as you are carrying on a business and the aggregated turnover of you and the entities connected to you is less than $2 million, and
• you have owned the property for more than 15 years and it has been used in a business carried on by you for a total of at least 7½ years of your ownership period.
In addition,
• you will have continuously owned the property for the 15-year period ending just before the CGT event
• you have had a significant individual for a total of at least 15 years during which you have owned the property, and
• your significant individual just before you dispose of the property will be over 55 at that time and the disposal of the property will happen in connection with their retirement.
Therefore, you qualify for the small business 15-year exemption in section 152-110 of the ITAA 1997 in relation to the property. Consequently, you can disregard the capital gain you make on its disposal.
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