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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1013073868602

Date of advice: 17 August 2016

Ruling

Subject: Capital gains tax

Question

Are you eligible to disregard any capital gain made on disposal of the property under the CGT 15-year exemption concession for small business?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2017

Year ended 30 June 2018

Year ended 30 June 2019

Year ended 30 June 2020

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You acquired a property more than 15 years ago.

You have a sole director and shareholder and they have been continuously involved for more than 15 years.

You have continuously owned the property for over 15 years.

The aggregated turnover of you and your related entities is less than $2 million.

Your sole director and shareholder, is selling the property as part of their retirement and is over 55.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 152-A

Income Tax Assessment Act 1997 Subdivision 152-B

Income Tax Assessment Act 1997 section 152-110

Reasons for decision

The rules covering the small business 15-year exemption are contained in Subdivision 152-B of the Income Tax Assessment Act 1997 (ITAA 1997).

If you qualify for the small business 15-year exemption you can entirely disregard the capital gain you make from the disposal of a capital gains tax (CGT) asset and do not need to apply any other concessions. In addition, you do not have to apply capital losses against your capital gain before applying the exemption.

Under section 152-110 of the ITAA 1997 a company can disregard the capital gain made on the disposal of a CGT asset if the company: 

    (a) satisfies the basic conditions for the small business CGT concessions in Subdivision 152-A of the ITAA 1997 for the gain

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

    (c) had a significant individual for a total of at least 15 years (even if it was not the same significant individual during the whole period) during which the company owned the CGT asset, and

    (d) an individual who was a significant individual of the company just before the CGT event either:

      (i) was 55 or over at that time and the event happens in connection with the individual's retirement, or

    (ii) was permanently incapacitated at that time.

In your case, the basic conditions contained in Subdivision 152-A of the ITAA 1997 will be satisfied because:

    • a CGT event will occur when you dispose of the property

    • the event will result in a gain

    • you are a small business entity as you are carrying on a business and the aggregated turnover of you and the entities connected to you is less than $2 million, and

    • you have owned the property for more than 15 years and it has been used in a business carried on by you for a total of at least 7½ years of your ownership period.

In addition,

    • you will have continuously owned the property for the 15-year period ending just before the CGT event

    • you have had a significant individual for a total of at least 15 years during which you have owned the property, and

    • your significant individual just before you dispose of the property will be over 55 at that time and the disposal of the property will happen in connection with their retirement.

Therefore, you qualify for the small business 15-year exemption in section 152-110 of the ITAA 1997 in relation to the property. Consequently, you can disregard the capital gain you make on its disposal.


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