| Disclaimer This edited version has been archived due to the length of time since original publication.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 private advice
Authorisation Number: 1051536959304
Date of advice: 1 November 2019
Ruling
Subject: Small business CGT concessions
Question 1
Did Person A continuously own 50% of the land (the Property) for 15 years just before the happening of a CGT event to satisfy paragraph 152-105(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
In relation to CGT, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner. Although Person A ceased being a legal owner of the property for a number of years, they continued to be a beneficial owner during this time. Therefore, they continuously owned 50% of the property for at least 15 years just before the CGT event.
Question 2
Does the Property satisfy the active asset test under section 152-35 of the ITAA 1997?
Answer
Yes.
Person A and Person B satisfy the conditions of the active asset test as they have used the asset for at least 7.5 years in the course of carrying on a business and the exceptions do not apply. Further information can be found by searching 'QC 52271' on ato.gov.au
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
Person A and Person B are spouses and jointly purchased the Property approximately 30 years ago.
The Property was used by Person A and Person B to conduct a business.
Person A and Person B registered the Business approximately 10 years ago, and it formally became a general law partnership (the Partnership) at that time, in which Person A and Person B were partners, with a 50% interest each.
They have sold the Property which brought to an end the Business and the Partnership, and they have retired.
Legal ownership of the property
Person A and Person B acquired the Property approximately 30 years ago as joint proprietors.
In the years leading up to 200X, Person A was dealing with an addiction issue.
Concerned that Person A might try and mortgage the Property to obtain finance to fuel their addiction, Person B insisted that Person A transfer registration of their share in the Property to Person B.
Approximately 20 years ago Person A agreed to transfer title to their share of the Property to Person B and their lawyers at the time were instructed to register Person B as sole proprietor. The transfer to Person B was always on the understanding that Person A remained a beneficial owner as to 50%, but that Person B would alone be registered on the title to protect their Property (at which their family home was situated).
Approximately 10 years later, Person B was satisfied that Person A had overcome their addiction issue and, at Person A's request as part beneficial owner, Person B registered Person A on title as to 50% joint proprietor in the same manner that they had originally been registered in 19XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 104-10(2)
Income Tax Assessment Act 1997 section 152-40
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Act 1997 paragraph 152-105(1)(b)