Edited version of your private ruling

Authorisation Number: 1011959653956

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Ruling

Subject: CGT 15 year exemption for individuals

Question

Do you satisfy the criteria under subparagraph 152-105 (d)(ii) of the Income Tax Assessment Act 1997, ITAA (1997) in regard to being permanently incapacitated at the time of the CGT event?

Answer

Yes. Therefore provided that you satisfy all the other requirements relating to the small business 15 year exemption under Subdivision 152-B, you will be entitled to disregard the capital gain on your portion of the business sale to the extent you are entitled to.

This ruling applies for the following period:

Year ended 30 June 2009

The scheme commenced on:

1 July 2008

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You had a capital gains tax (CGT) event in the 20XX income year when you sold a business you had owned and operated for over XX years in a partnership.

Since the sale of your business you have been on the Disability pension because of your disability.

You were previously unaware that you may be entitled to an exemption from a capital gain on the sale of the business due to your permanent disability.

A letter has been provided from your medical practitioner confirming your permanent disability at the time of the CGT event.

Relevant legislative provisions

Income Tax Assessment Act 1997, division 152

Income Tax Assessment Act 1997, subsection 152-100

Income Tax Assessment Act 1997, subparagraph 152-105(d)(ii)

Does Part IVA apply to this ruling?

Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable.

We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.

If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

For more information on Part IVA, go to our website www.ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select: 'Part IVA: the general anti-avoidance rule for income tax'.

Reasons for decision

These reasons for decision accompany the Notice of private ruling for the rulee.

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Note that all subsequent legislative references are to the ITAA 1997 unless otherwise stated.

15-year exemption for individuals 

Section 152-105 provides the conditions required to qualify for the 15 year exemption as follows;

If you are an individual, you can disregard any capital gain arising from a CGT event if all of the following conditions are satisfied:

(a) the basic conditions in Subdivision 152-A are satisfied for the gain;

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

(c) if the CGT asset is a share in a company or an interest in a trust - the company or trust had a significant individual for a total of at least 15 years (even if the 15 years was not continuous and it was not always the same significant individual) during which you owned the CGT asset;

(d) either:

(i) you are 55 or over at the time of the CGT event and the event happens in connection with your retirement; or
(ii) you are permanently incapacitated at the time of the CGT event.

Application to your circumstances

You have advised that at the time of the sale of the business you were permanently incapacitated due to disability.

This has been confirmed by your medical practitioner in a letter received by this office advising that you have suffered severe disability for many years.

Your medical practitioner advised that;

You managed to cope for years in your business with the support of family and staff, but found it increasingly difficult to manage in the business with your disability.

From the time of the sale of your business, you were granted a full permanent disability pension by the Australian Government.

It is considered that you meet the criteria under subparagraph 152-105 (d)(ii) in regard to being permanently incapacitated at the time of the CGT event.

Therefore, provided that you satisfy all the other requirements relating to the small business 15 year exemption under Subdivision 152-B, you will be entitled to disregard the capital gain on your portion of the business sale to the extent you are entitled to.