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Edited version of private advice

Authorisation Number: 1051789954462

Date of advice: 14 December 2020

Ruling

Subject: Capital gains tax for small business concessions

Question

Are you entitled to claim the small business capital gains 15-year exemption on the sale of your property pursuant to Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This ruling applies for the following period

1 July 20yy to 30 June 20xx

The scheme commenced on

1 July 20yy

Relevant facts and circumstances

1.      You purchased a property in 20kk.

2.      You have continuously owned the asset for a period exceeding 15 years.

3.      During this entire time, the property has been used in a business activity.

4.      You are the 'Sole Director' and have absolute control of the company.

5.      You and another are joint shareholders of the company.

6.      You moved to establish a branch of the company in 20xx.

7.      You have remained the owner of the company and have made significant capital improvements to the property.

8.      The total aggregated net asset value of all the affiliated parties combined is below $6 million.

9.      You are over 55 years of age.

10.   You have closed your business permanently and have retired from the business activities you were involved in.

11.   An offer was received by you in respect to the sale of the asset.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 152

Income Tax Assessment Act1997 Subdivision 152-A

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 subsection 152-10(1)

Income Tax Assessment Act 1997 subsection 152-15

Income Tax Assessment Act 1997 subsection 152-40

Income Tax Assessment Act 1997 subsection 152-105

Income Tax Assessment Act 1997 section 328-125

Other references (non ATO view)

TD 2006/63 Income tax: capital gains: is a CGT asset that is leased by a taxpayer to a connected entity for use in the connected entity's business an active asset under section 152-40 of the Income Tax Assessment Act 1997?

The "Explanatory Memorandum" to the Tax Laws Amendment (Small Business) Bill 2007 (EM)

Doutch v FC of T [2016] FCAFC 166

Reasons for decision

Detailed reasoning

Small business 15-year exemption

Section 152-105 of the Income Tax Assessment Act 1997 (ITAA 1997) provides a small business 15-year exemption for individuals. Under this section, you can disregard the capital gain you make on the disposal of a CGT asset if you:

(a)  satisfy the basic conditions for the small business CGT concessions in Subdivision 152-A of the ITAA 1997;

(b)  continuously owned the CGT asset for the 15-year period ending just before the CGT event, and

(c)   are at least 55 years old at the time of the CGT event and the event happens in connection with your retirement.

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 and your affiliates satisfy the maximum net asset value test for the income year ended 30 June 20xx

•         the CGT asset satisfies the active asset test as the Property is considered an active asset as it was used in the business activity of an affiliate.

•         the CGT event will happen in connection with your retirement

•         you have owned the Property continuously for more than 15 years ending just before the CGT event, and

•         you will be at least 55 years old when you dispose of the Property.

Conclusion on small business 15-year exemption on sale of your Property

You qualify for the small business 15-year exemption in section 152-105 of the ITAA 1997 in relation to the sale of the property.

You can disregard the capital gain you make on the disposal of the property.

 

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