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Edited version of your written advice
Authorisation Number: 1051286665528
Date of advice: 25 September 2017
Ruling
Subject: Small Business Concessions - Pre-CGT Active Asset - 15 year exemption - Superannuation Contributions
Question
Would the taxpayers be entitled to apply the Capital Gains Tax (CGT) small business concession 15 year exemption in relation to the sale of the property if the property was not a pre-CGT asset?
Answer
Yes
Other than the pre-CGT status, the sale of the property meets the basic conditions for relief under the Small Business Concessions (SBC) in section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997). The taxpayers are running several small business enterprises. The property meets the criteria to be an active asset. It has been used in the course of carrying on the businesses by the taxpayers, and the main use of the property has not been to derive rent. The property would also pass the active asset test. It has been held for more than 15 years and has been an active asset for more than seven and a half of those years.
Other than the pre-CGT status of the property, the taxpayers would also meet the criteria for the 15 year exemption for individuals in section 152-105 of the ITAA 1997. The taxpayers are both over the age of 55 and the sale of the property is connected to their retirement from the business. Subsection 292-100(5) of the ITAA 1997 allows a taxpayer to deem an eligible pre-CGT asset to be post-CGT for the purposes of superannuation contributions.
This ruling applies for the following periods:
1 July 2017 to 30 June 2018
The scheme commences on:
1 July 2017
Relevant facts and circumstances
Taxpayer One and Taxpayer Two jointly own a property of a certain size.
The taxpayers purchased the property prior to 1985 for an amount. The property is a pre CGT asset.
Around 5% of the area of the property is used by the taxpayers in partnership to conduct a business.
The taxpayers personally undertake all the tasks involved in running the business.
Taxpayer One conducts a sole trader business from the property. Taxpayer Two also conducted a sole trader business for a period of time.
The remaining area the property has been subject to a lease since acquisition to an unrelated third party. The income from the leased land has been less than 10% of the total income from the property.
The taxpayers will sell the property for an amount. On sale of the property, the taxpayers will make a superannuation contribution from the proceeds of the sale of the property.
The taxpayers are over 65 years of age.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 152
Income Tax Assessment Act 1997 Section 292-100
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