Edited version of private advice

Authorisation Number: 1052352597209

Date of advice: 18 February 2025

Ruling

Subject: CGT - small business 15-year exemption

Question 1

Will your disposal of the interests in the land satisfy the basic conditions to access the small business capital gains tax (CGT) concessions in Subdivision 152-B of Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

Yes. A CGT event resulting in a gain will occur when you sell the land. You have owned the land for over 15 years, and it was used by a connected trust that is a small business entity to carrying on a primary production business for over 7.5 years. You are the directors and equal shareholders of the corporate trustee and have received all trust distributions between you in recent years.

Question 2

Are you entitled to the 15-year exemption in relation to this disposal, under section 152-105 of ITAA 1997?

Answer 2

Yes. You meet the basic conditions as outlined above, you have continuously owned the land for over 15 years, you are over 55 years old, and the sale of the land will be in connection with your retirement.

This ruling applies for the following periods:

Year ended 30 June 202X

Year ended 30 June 202Y

The scheme commenced on:

XX July 199X

Relevant facts and circumstances

You purchased a rural property over XX years ago which included your main residence in which you have lived since the property was acquired.

The property consists of between XX and XXX acres and the land, other than the part of the property used in association with their main residence, has been used to carry on a primary production activity by a related trust.

You also operate another business through the trust which has a corporate trustee.

You are the directors and equal shareholders of the corporate trustee.

You are beneficiaries of the trust in addition to your children who are the primary beneficiaries of the trust though your children do not appear to have ever received a distribution from the trust.

One of you was paid a PAYG wage by the trust and the other received the bulk of the trust distributions in recent years (you both were the only beneficiaries to receive distributions).

The zoning of the property changed from rural to industrial due to the same zoning change to the property behind yours. You had nothing to do with the change in zoning.

You are both over 60 years of age.

You engaged a town planner to subdivide the property into 2 lots. One lot on which you intend to continue to reside is approximately XX% of the property with the other lot (back block) approximately XX% of the property.

Both lots are accessible by existing roads.

According to income tax returns lodged, the primary production activity made small losses and profits in recent years.

In prior income years, income from the primary production activity was amalgamated with the income from the other business on lodged returns.

You have put the other business on the market and will retire, regardless, by the end of June 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 section 152-105

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