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Edited version of private advice
Authorisation number: 1052414883942
Date of advice: 3 July 2025
Ruling Subject: CGT - small business concessions
Question
Can the Unit Trust claim the 15-year exemption under section 152-110 of the Income Tax Assessment Act 1997 (ITAA 1997) for the capital gains made on the sale of the property?
Answer
Yes.
The sale of the Property resulted in a capital gain. The Unit Trust owned the property continuously for over 15 years. The property was used by a connected entity to the Unit Trust for more than 7.5 years and satisfies the active asset test. The connected entity is a discretionary family trust carrying on a business of manufacturing from this property. The Family Trust is a small business entity, therefore the Unit Trust satisfies the basic conditions under Division 152-A of the ITAA 1997. Individual A and individual B are both significant individuals of the Unit Trust. Both are over 55 years and are seeking to sell the business and retire. Therefore, the Unit Trust is eligible for the 15-year exemption for the disposal of the Property under section 152-110 of the ITAA 1997.
This ruling applies for the following period:
Year ended 30 June 20YY
The scheme commenced on:
1 July 20YY
Relevant facts and circumstances
The Unit Trust purchased the Property in 20YY. The Unit Trust developed the Property, and the Property has been producing commercial rental income since 1 July 20YY.
The Unit Trust's profit and loss statements for the income years 20YY through to 20YY outlined the rental income received from the Family Trust. More than 40% was distributed to the Family Trust and the remainder was distributed to the Superannuation Fund.
The Property was used as the main business premises by the Family Trust. The Family Trust operated a business from the Property from about December 20YY and up until the sale of the Property.
The Family Trust generally distributes 50% of the income to individual A and 50% to individual B.
The Unit Trust sold the Property in the 20YY-YY financial year.
Since the Property sold, the Family Trust business has been operating from a beneficiary's main residential address. Individual A and individual B plan to sell the Family Trust business and retire.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 152-10(1A)
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Ac t1997 paragraph 152-40(1)
Income Tax Assessment Act 1997 paragraph 152-40(4)(e)(ii)
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