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Edited version of private advice
Authorisation Number: 1051541191576
Date of advice: 17 July 2019
Ruling
Subject: Compulsory acquisition and small business concessions
Question
Can you apply the small business 50% active asset reduction and the retirement exemption under Subdivision 152-C and D of the Income Tax Assessment Act 1997 (ITAA 1997), to the capital gain made from granting the easement?
Answer
Yes. In accordance with Taxation Ruling TR 97/3, the compulsory acquisition of the easement is treated as a partial disposal of the land and will result in a capital gain. You satisfy the basic conditions for relief under Subdivision 152-A of the ITAA 1997 in relation to this gain: you are a CGT small business entity and the property was actively used by you in carrying on a business for your entire ownership period. Accordingly, you can apply the small business 50% active asset reduction. You may also apply the retirement exemption (up to your $500,000 lifetime limit) if you make the relevant choice in writing. Further information can be found by searching QC52290 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
You inherited the land in 19XX.
You are a small business entity and the land has been actively used in carrying on a business since you inherited it.
The aggregated turnover for the business is less than $X million.
In 20XX you exchanged a contract with a non-government entity granting an easement over the land. The non-government entity had the power to compulsorily acquire the easement if negotiations failed.
You incurred a capital gain from this transaction and this is not in connection with your retirement.
You are over 55 years of age.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 124-70
Income Tax Assessment Act 1997 section 152-10
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Act 1997 section 152-205
Income Tax Assessment Act 1997 section 152-305