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Edited version of your written advice
Authorisation Number: 1051496208997
Date of advice: 15 April 2019
Subject: Capital gains tax - small business concessions - 15 year exemption
Question 1
Do you satisfy the basic conditions for relief under section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the sale of the property?
Answer
Yes.
Based on the information provided you meet the basic conditions for the following reasons:
● You sold the property giving rise to CGT event A1 and made a capital gain on the sale of the property.
● You are a small business entity for the 20XX-XX income year as you carried on a business and your aggregated turnover including that of your affiliates and connected entities was less than $2 million.
● The property satisfies the active asset test under section 152-35 of the ITAA 1997 on the basis the property (which has been co-owned by you for more than 15 years) has been used by you in carrying on a business for at least 7 ½ years and not used to mainly derive rent during the period of ownership.
Question 2
Can you claim the 15 year exemption under section 152-105 of the ITAA 1997 for the capital gain arising from the sale of the property?
Answer
Yes.
The basic conditions in Subdivision 152-A of the ITAA 1997 are satisfied, you owned your share of the property for more than 15 years, you were at least 55 years of age at the time of the sale, and the Commissioner accepts that the sale was in connection with your retirement.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
In 199X you and your partner purchased a commercial property (the property).
The property is owned as tenants in common.
You and your partner operated separate businesses as sole traders from the property.
You and your partner utilised more than 50% of the property to carry on your respective businesses until the property was sold during the 20XX-XX income year.
Approximately a quarter of the floor area of the property was used to derive rent from various tenants.
You are your partner are affiliates due to the operation of section 152-47 of the ITAA 1997.
During your ownership of the property, the business income of you and your partner has exceeded the rental income generated by the property.
You made a capital gain on the sale of the property.
You were over 55 years of age when the property was sold.
You spent 60 to 70 hours per week engaged in your business activity until part way through the 20XX-XX income year when, in preparation for your retirement, you reduced your hours spent on your business activity to 10 to 20 hours per week.
By XX/XX/20XX you had retired and ceased your business activity.
You are connected with Company A.
For the 20XX-XX income year, your aggregated turnover, including that of your affiliates (your partner) and your connected entities (Company A) was less than $2 million.
Relevant legislative provisions
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 Section 152-47
Income Tax Assessment Act 1997 Section 152-105
Income Tax Assessment Act 1997 Section 328-115