Edited version of your written advice

Authorisation Number: 1012927923215

Date of advice: 16 December 2015

Ruling

Subject: Capital gain tax-small business concession-15 year exemption

Question:

Will you be entitled to claim the small business capital gains tax (CGT) 15-year exemption under Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997) to reduce the capital gain on the disposal of a property that has been not continuously owned for a period of 15 years?

Answer:

No

This ruling applies for the following period:

Year ended 30 June 2016

The scheme commenced on:

1 July 2015

Relevant facts

An entity which you and your former spouse were shareholders of purchased a property after 20 September 1985.

The entity's name was on the title deed of the property

The entity leased the property to another entity which you were a shareholder of. That other entity used the property to carry on a business.

You and your former spouse divorced.

You recently purchased the property from the entity.

The sale of the property was not part of the divorce settlement.

Your name is on the title deed of the property.

You may sell the property in the near future.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-105.

Reasons for decision

Small business 15 year exemption
Section 152-100 of the ITAA 1997 provides that if you qualify for the small business 15-year exemption, you can entirely disregard the capital gain and do not need to apply any other concessions. You do not have to apply capital losses against your capital gain before applying the 15 year exemption. 

Conditions
Section 152-105 of the ITAA 1997 states that you can disregard a capital gain from a CGT event happening to a CGT asset you have owned for at least 15 years if you: 

• Satisfy the basic conditions for the small business CGT concessions (the active asset test requires the asset to have been an active asset for a certain period);

• Continuously owned the CGT asset for the 15 year period ending just before the CGT event happened; and

• If you are an individual

• you are at least 55 years old at the time of the CGT event and the event happens in connection with your retirement, or

• you were permanently incapacitated at the time of the CGT event.

There are additional conditions if you are a company or trust and if the CGT asset is a share in a company or an interest in a trust (section 152-110 of the ITAA 1997).

In your case, the property was owned by an entity until it was sold to you recently. In order to gain access to the 15 year small business concession, the conditions in section 152-105 of the ITAA 1997 must be met. One of those conditions is the property must be owned for 15 years. Although the property you are considering selling was previously owned by an entity of which you were a shareholder, the period that the entity owned the property does not count towards the period that you owned it. As you have not owned the property for 15 years, you are not entitled to the 15 year exemption. This concession cannot be applied until you have held the property for a period of 15 years and you also meet the other conditions noted above.

However where an individual or a small business (excluding a company) holds an asset for more than one year and they make a capital gain on the sale of the asset generally they can discount the capital gain by 50%.