Edited version of private advice

Authorisation Number: 1052009935135

Date of advice: 20 July 2022

Ruling

Subject: CGT - small business concessions

Question 1

Will CGT event A1 occur in relation to the disposal of the property?

Answer

Yes. The disposal of the property by you to a related entity will be a CGT Event A1. Further information on CGT Events can be found by searching 'QC 66016' on ato.gov.au.

Question 2

Does the disposal of the property meet the requirements of subparagraph 152-105(1)(d)(i) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. After considering the facts and circumstances the Commissioner considers that the disposal of the property is in connection with your retirement as you will significantly reduce your employment hours worked and will totally cease your primary production activities. Further information about whether a CGT event is in connection with retirement can be found by searching 'QC 52288' on ato.gov.au.

Question 3

Would the gain from the disposal of the property be included in your assessable income as income according to ordinary concepts under section 6-5 of the ITAA 1997?

Answer

No. After considering the facts and circumstances the Commissioner does not consider that the disposal of the property by you to an unrelated entity at market value would amount to the carrying on of a business or an isolated commercial transaction whereby any gains made would be assessable as ordinary income. The disposal of the property by you is considered the mere realisation of a capital asset. Further information on the tax consequences of disposal of land can be found by searching 'QC 23614' on ato.gov.au. Information on whether an activity amounts to the carrying on of a business can be found by searching 'QC 31733' on our website.

This ruling applies for the following period:

Income year ended 30 June 202A

The scheme commences on:

1 July 202B

Relevant facts and circumstances

You are an individual who is over 65 years old.

For many years you have conducted a primary production business and another professional business through a related company You are a director and hold over 99% of the shares in this company.

Your aggregated turnover (including entities connected with or affiliated to you) for the 20XX to 20XX income years is under $X million in each year.

The primary production business was conducted on land you acquired on DDMM1985 and has been used in the primary production business since acquisition.

The land is able to be zoned for industrial use.

You spend around XX hours per week employed in your primary production business.

The turnover from the primary production business was over $XXX in the 20XX income year.

You have conducted your professional business since 196A. This is conducted at a separate premises.

You spend in excess of YY hours per week employed in the professional business.

The turnover of the professional business in the 20XX income year was over $X million.

You received an annual income of $ZZZ from your professional business during the 20XX income year pursuant to the Personal Services Income rules.

You are seeking to transition to retirement, which includes ceasing all primary production business activities, and significantly reducing the number of hours you spend within the professional business.

Concurrently with the cessation of the primary production business, you are seeking to dispose of the land to an unrelated third party at market value, as part of your transition to retirement.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 108-5

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 section 152-105

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