Edited version of private advice

Authorisation Number: 1051617943557

Date of advice: 13 December 2019

Ruling

Subject: Small Business CGT Concessions

Question

Can you reduce the capital gain made on the disposal of property two by applying the small business retirement exemption?

Answer

Yes. In this case you are over 55 and you satisfy the basic conditions. You are eligible to reduce your gain by applying the small business retirement exemption up to your life time limit of $500,000. Additionally as you're over 55 years there is no requirement to pay any amount into a complying superannuation fund or retirement savings account. However you must keep a record of the amount you choose to disregard. Further information can be found by searching 'QC 52290' on ato.gov.au

Question 2

Can you reduce the capital gain made on the disposal of property two by applying the CGT small business 50% active asset reduction?

Answer

Yes. In this case you satisfy the basic conditions and therefore the 50% active asset reduction can be automatically applied unless you choose for it not to apply. Further information can be found by searching 'QC 52289' on ato.gov.au

Question 3

Can you defer all or part of a capital gain, made from the disposal of property two by applying the small business rollover relief?

Answer

Yes. In this case you satisfy the basic conditions. You can choose to obtain a rollover even if you haven't yet acquired a replacement asset or incurred expenditure on a capital improvement to an existing asset. Please refer to 'QC 52291' on ato.gov.au for further information and note that the replacement asset can be acquired one year before or up to two years after the last CGT event that occurs in the income year for which you choose the rollover.

This ruling applies for the following periods:

Year ended 30 June 2019

Year ending 30 June 2020

The scheme commences on:

01 July 2007

Relevant facts and circumstances

The significant individual is the sole shareholder / director of the following corporate entities:

·        Company one: and

·        Company two.

Company two operated a business

Company one purchased a property.

The significant individual purchased another property (property two)

Property two was acquired for direct secure access to the property one and to support the business.

In their personal capacity and under company one, the significant individual leased property one and property two to company two on a commercial basis.

Property one and property two were leased from the time of acquisition and until their disposal.

Company one has used property one and property two to conduct the business of company two.

Property one and property two have never been used for any other purpose then to operate the business.

Property one and property two are active assets.

There has never been any private use of the property one or property two; they are exclusively used for the business operation of company two.

The turnover of company one for the test year was less than $2 million.

Property one was disposed of and a capital gain was made

Property two was disposed of and a capital gain was made

The significant individual is over 55 at the time of the CGT event and intends to retire.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 152-10

Income Tax Assessment Act 1997 Section 152-10(2)

Income Tax Assessment Act 1997 Section 152-10(1)(c)(i)

Income Tax Assessment Act 1997 Section 152-35(1)

Income Tax Assessment Act 1997 Section 152-40

Income Tax Assessment Act 1997 Section 152(c)

Income Tax Assessment Act 1997 Section 328-110(1)