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Edited version of private advice
Authorisation Number: 1051511074524
Date of advice: 9 May 2019
Ruling
Subject: Capital gains tax and small business concessions
Question
Can you reduce the capital gain when you disposed of your interest in the property and apply the small business active asset concession?
Answer
Yes. You satisfied the basic conditions for relief under Subdivision 152-A of the ITAA 1997: the property was used by X, a small business entity who is connected to you, for more than seven and a half years. The Commissioner is satisfied the asset's main use was not to derive rent. Further information can be found by searching QC52289 on ato.gov.au.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
As partners in a partnership you each acquired an interest in property in 20XX (the property). The property was made up of four offices.
From 20XX to 20XX the partnership rented out two offices to Y and the other two offices were rented to unrelated parties.
Y ceased trading in 20XX.
From 20XX X commenced renting two offices from the partnership. X also carries on a business. X continues to rent a portion of the property to the current date for use in its business.
100% of the units in X are held by Z. You are both trustees and beneficiaries of Z.
In 20XX, there was a change in the partnership structure. The other partners left the business and sold their interest to an entity. You each continued to retain your interest.
Under the new partnership structure, the partnership continued to rent two offices to X and the other two offices were still rented to unrelated parties.
The business income that was derived was significantly higher than the rental income over the relevant years.
X was a CGT small business entity in the 20XX-XX income year, with an aggregated turnover less than $2 million.
In 20XX, you each sold your share in the property.
The disposal is not in connection with your retirement.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-10
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Act 1997 section 152-40
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