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Edited version of private advice
Authorisation Number: 1051617709655
Date of advice: 12 December 2019
Ruling
Subject: Capital gains tax
Question
Is the trust entitled to the capital gains tax (CGT) small business 15 year exemption?
Answer
Yes.
Yes. The trust satisfies the basic conditions for the small business concession under section 152-10 of Subdivision 152-A of the Income Tax Assessment Act 1997 (ITAA 1997) upon the sale of the property. The significant individual was over 55 years old and the CGT event happened in connection with their retirement. The trust has owned the active asset for more than 15 years. The Commissioner considers that the conditions under section 152-110 of Subdivision 152-B of the ITAA 1997 are satisfied.
This ruling applies for the following period
Year ending 30 June 2019
The scheme commenced on
1 July 2018
Relevant facts
The trust purchased property more than 15 years ago.
The property was used by entity A as its business premises.
Entity B and entity C are trustees of the trust and two of the directors of entity A.
Entity B and entity C controlled the trust.
Entity B was over 55 at the time of the CGT event.
The trust is owned 50/50 by entity D and entity E.
Entity E received 50% of all distributions from the trust.
A significant individual received between 62% and 100% of the distributions from entity E in the relevant years.
The Board of Directors that controlled Entity A included entity B and entity C and two other entities. The Directors of entity A were these same entities.
The trust and entity A had separate bank accounts and rent was paid from entity A's bank account to the trust's bank account.
The trust didn't have any employees. Only entity A had employees.
The trust didn't officially have premises to work from as it just rented the property to entity A.
The original shares in the company were sold recently.
It was decided not to sell the property until the lease expired so that vacant possession could be given to the purchaser and renovations could be carried out to achieve the best price.
When the lease expired, renovations took place. The property was listed for sale and sold in 2019.
Entity B continued to work for entity A after the sale and then worked on preparing the property for sale. Entity B retired from managing and renovating the property recently.
Entity B is the significant individual just before the CGT event.
The net assets of the trust and all other entities connected with the trust and affiliates and entities connected with the trust's affiliates for the 2018-19 income year is below $6,000,000.
The trust meets the basic conditions for the small business CGT concessions.
100% of the distributions from entity D are going to entity C for the 2018-19 income year.
100% of the distributions from entity ET are going to entity B for the 2018-19 income year.
The trust has not made any capital distributions since its inception.
Relevant legislative provisions
Income Tax Assessment Act 1997 - Division 152
Income Tax Assessment Act 1997 -Subdivision 152-A
Income Tax Assessment Act 1997 - Subdivision 152-B
Income Tax Assessment Act 1997 - Section 152-110