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Edited version of private advice
Authorisation Number: 1051648179534
Date of advice: 07 April 2020
Ruling
Subject: Capital gains tax - small business 15-year exemption
Question
Are you entitled to the capital gains tax (CGT) small business 15-year exemption on the sale of your property?
Answer
Yes.
You satisfy the basic conditions for the small business concessions under section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997) upon the sale of the property as:
· Company Z, which is a small business entity, is connected with you as you own equity interests in the company that gives you at least 40% of the voting power in the company (paragraph 328-125(2)(b) of the ITAA 1997);
· Your property is used by the company in carrying on its business (subsection 152-10(1A) of the ITAA 1997); and
· Your property passes the active asset test as it has been used by the company in carrying on its business for more than 7.5 years (sections 152-35 and 152-40 of the ITAA 1997).
You satisfy the additional requirements under section 152-105 of the ITAA 1997 to access the small business 15-year exemption as:
· You will have continuously owned the property for the 15-year period prior to the sale;
· You are over 55 years old; and
· The sale of your property will happen in connection with your retirement.
This ruling applies for the following period
Year ending 30 June 2020
The scheme commenced on
1 July 2019
Relevant facts
You own a property.
You have owned the property for more than 15 years.
The property has been used for a business for the entire time.
Company Z (the company) runs the business.
The company is a small business entity as its aggregated turnover is less than $2 million.
You and your spouse have x A class share each. You both acquired your shares more than 15 years ago.
Your relations each have xxx B class shares. These shares were acquired more than 15 years ago.
The A class shares are equity and governing shares.
The B class shares are dividend only shares.
You and your spouse each have 50% of the voting power in the company and are each entitled to 50% of the capital.
You, your spouse and relations are directors in the company.
The company will be selling the business to your relations' new company.
You wish to sell the property to your relations at the same time the company sells the business.
You are not a small business entity.
You do not pass the maximum net asset value test.
You are over 55.
After selling the property you will stop work.
Relevant legislative provisions
Income Tax Assessment Act 1997 - section 152-10
Income Tax Assessment Act 1997 - subsection 152-10(1A)
Income Tax Assessment Act 1997 -section 152-35
Income Tax Assessment Act 1997 -section 152-40
Income Tax Assessment Act 1997 - section 152-105
Income Tax Assessment Act 1997 - paragraph 328-125(2)(b)