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Edited version of private advice
Authorisation Number: 1051525743554
Date of advice: 25 July 2019
Ruling
Subject: Capital gains tax: CGT small business concessions: 15 year exemption
Question 1
Does a CGT event occur on the date of signing the Contract of Sale?
Answer 1
Yes, subsection 104-10(3) of the Income Tax Assessment Act 1997 (ITAA 1997) confirms that the CGT event occurs when you enter into the contract for the disposal of the business. Further information can be found by searching 'QC 52166' on ato.gov.au.
Question 2
Is the property considered an active asset?
Answer 2
Yes, the Commissioner considers that the property was used in the course of carrying on a business by you and is an active asset in accordance with subsection 152-40(1) of the ITAA 1997.
Question 3
Does the delayed settlement impact the capital gains tax calculation?
Answer 3
Yes, you are not required to include any capital gain or loss in the year of sale until settlement occurs. However, once settlement occurs, the capital gain or loss is included in the year of income in which the Contract of Sale was made. If an assessment has already been made, you may need to have that assessment amended. Although it is not required, you may elect to include any capital gain or loss in the relevant return prior to settlement.
Question 4
Can you disregard the capital gain made on the disposal of the business under the small business 15 year exemption?
Answer 4
Yes. You won't have an assessable gain on the sale of the active asset as you have met the basic conditions, are over 55 years old and you have owned the active asset for more than 15 years. The Commissioner also considers that the CGT event has happened in connection with your retirement. Further information can be found by searching 'QC 52288' on ato.gov.au
This ruling applies for the following period:
Year ending 30 June 20xx
The scheme commences on:
1 July 20xx
Relevant facts and circumstances
You are aged over 55.
You owned the property.
You operated a business (the business) from the property.
You have owned the property continuously since that time and have always operated it as the business.
You will sell the property to Company A.
A portion of the purchase price is paid on the signing of the Contract of Sale with the remaining portion payable at settlement in several years.
Upon signing the Contract of Sale and payment of the deposit, you will enter into a lease with Individual A and Individual B for them to lease the property.
The lease provides that the permitted use of the property is as Business A.
The legal title to the property will not pass until settlement.
You are a small business entity.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 152-40
Income Tax Assessment Act 1997 section 152-105