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Edited version of private advice
Authorisation Number: 1051903458618
Date of advice: 28 September 2021
Ruling
Subject: CGT small business concession - 15-year exemption
Question 1
Did the disposal (the CGT event) of the 4 blocks of land (the 4 Properties) used in the primary production business of a connected entity meet the conditions in section 152-105 of the Income Tax Assessment Act 1997 (ITAA 1997) for the small business 15-year exemption?
Answer
Yes. Based on the information provided, the CGT event met the relevant conditions, including the condition that the event happens in connection with the retirement, under paragraph 152-105(d)(i) of the ITAA 1997.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
Person 1 and Person 2 jointly purchased the Properties: -
• XX in 198X,
• XX, XY and XZ in 19XX.
Since 19XX, the Properties have been used by the primary production business of XX breeding conducted by the trustee of the XX Trust (the Trust).
The trustee of the Trust is XX Pty Limited (the Corporate trustee).
The directors of the Corporate trustee are Person 1 and Person 2. They were both appointed as directors in 19XX. There have been no other directors since the appointment of Person 1 and Person 2.
As pursuant to subsection 328-125(3) of the ITAA 1997, Person 1 and Person 2 have direct control of the Trust. Their direct control of the Trust may also be established by the alternative test under subsection 328-125(4) of the ITAA 1997.
The Trust is therefore 'connected with' each of Person 1 and Person 2, as defined by subsection 328-125(1) of the ITAA 1997.
The Trust is a CGT small business entity as defined by subsection 152-10(1AA) of the ITAA 1997 as its turnover for the year ended 30 June 20XX was less than $X million.
The CGT event met the basic conditions under subsection 152-10(1) of the ITAA 1997 for the small business CGT concession, including the special conditions for passively held assets in subsection 152-10(1A) for the purpose of meeting paragraph 152-10(1)(c)(iv) of the ITAA 1997.
Person 1 and Person 2 entered exchange of contracts to dispose the Properties in XX 20XX. They have continuously owned the Properties for longer than 15 years just before the CGT event.
Person 1 and Person 2 were over the age of 55 at the time of the CGT event. They were actively working in the primary production business of the Trust until the point of the CGT event, and permanently retired as a result of the CGT event, without any delay.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 152-10
Income Tax Assessment Act 1997 Section 152-105
Income Tax Assessment Act 1997 Section 328-125