Edited version of private advice

Authorisation Number: 1052402603501

Date of advice: 02 June 2025

Ruling

Subject: CGT - small business concessions

Question 1

Does the trust satisfy the basic conditions under section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997) to apply the small business capital gains tax concessions in relation to the sale of the factory for the year ending 30 June 20XX?

Answer 1

The trust owned the factory for less than X years. The sale of the factory resulted in a capital gain. The factory was rented out to two tenants for the entire ownership period. Company A is 100% owned by the Trust while tenant B is a third party. Company A, a small business entity connected with the trust, uses XX% of the space to carry on a business while Tenant B rents XX% of the space. The main use of the factory is not to derive rent and accordingly the factory satisfies the active asset test and the basic conditions under 152-10 of the ITAA 1997.

Question 2

Does the trust meet the conditions to apply the small business retirement exemption under Division 152-D of the ITAA 1997 to the capital gain on the sale of the factory?

Answer 2

Yes. The Trust meet the basic conditions as mentioned above. Person A and B are both significant individuals of the Trust and are over 55 years of age. Therefore, when the Trust makes the choice to access the retirement exemption, there is no requirement to pay the exempt amount (up to $500,000) to a complying superannuation fund or RSA.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The Trust) entered a contract to purchase a factory in January 20XX.

The purchase settled in November 20XX.

The appointor of the Trust is person A.

The directors of the Trustee are person A and person B.

The primary beneficiaries of the Trust are person A and person B and their children.

The factory was rented to two tenants:

•                XX% of the lettable area of the building to tenant A

•                XX% of the lettable area of the building to tenant B

The tenants had access to move into the factory from November 20XX.

The first rent payment from both tenants were received in January 20XX.

Tenant A is Company A which is 100% owned by the trust.

The director of Company A is person A.

Company A uses the factory in its manufacturing operations managed by person A and B.

Company A's aggregated annual turnover for the 20XX-20XX financial year was less than $2 million.

Tenant B is an unrelated third party.

Tenant B has decided it will be closing the business by 30 June 20XX due to several major hurdles in its operations.

Tenant B does not wish to renew its lease (due to expire January 20XX) but advised that it was willing to vacate earlier.

The Trust sold the factory in March 20XX.

Settlement is due in August 20XX.

The capital gain from the sale of the factory will be distributed to person A and person B in equal shares.

The Trustee has made distributed its income in equal shares between person A and person B in each financial year since the 20XX income year.

Person A and person B are both over 55 years of age.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 152-A

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 section 152-35

Income Tax Assessment Act 1997 section 152-40

Income Tax Assessment Act 1997 Subdivision 152-D

Income Tax Assessment Act 1997 section 328-125

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