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Edited version of your written advice

Authorisation Number: 1051468214016

Date of advice: 14 January 2019

Ruling

Subject: Small business concessions

Question 1

Do you satisfy the basic conditions for the small business capital gains tax (CGT) concessions on the sale of the property?

Answer

Yes

You satisfy the basic conditions as your CGT asset is used in a business carried on by a small business entity connected with you. You satisfy the conditions of the active asset test as you have used the asset for at least 7.5 years in the course of carrying on a business and the exceptions do not apply. Further information can be found by searching 'QC 44192' on ato.gov.au

Question 2

Can you disregard the capital gain made on the disposal of the property under the small business 15 year exemption?

Answer

Yes

You won’t have an assessable gain on the sale of the active asset as you have met the basic conditions, are over 55 years old and you have owned the active asset for more than 15 years. The Commissioner also considers that the CGT event has happened in connection with your retirement. Further information can be found by searching 'QC 52288' on ato.gov.au

This ruling applies for the following period:

Year ending 30 June 2019

The scheme commences on:

1 July 2018

Relevant facts and circumstances

You are over the age of 55.

You inherited the property from your parent after 20 September 1985.

Your parent acquired the property before the introduction of capital gains tax on 19 September 1985.

The property has been used by your family’s business (the company) for more than 15 years. The property has not been used for any other purpose throughout your ownership period.

The company has an aggregated turnover less than $2,000,000 in the previous financial year. This includes any amounts sourced from connected and affiliated companies.

You are currently the sole director of the company and are transitioning into retirement in the year ending 30 June 2020.

As part of your retirement, you intend to transfer the property by creating a unit trust over the property in the year ending 30 June 2019. The unit trust will be owned by a family discretionary trust. The disposal of the property will trigger a CGT E1 event and you will realise a capital gain.

There are currently ordinary shares in the company, which are owned by:

Upon retirement, you will be handing over all general management duties to your current Chief Financial Officer.

The company will also appoint a new director, allowing you to reduce your current working hours from XX hours over X days to X hours in X day. This will commence in the year beginning 1 July 2019.

You will remain a director in a non-executive role within the company, to maintain this ownership position in the company.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 152-A

Income Tax Assessment Act 1997 Subdivision 152-B

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