Edited version of private advice

Authorisation Number: 1051908355765

Date of advice: 15 November 2021

Ruling

Subject: CGT - small business concessions 15-year exemption

Question

Are you entitled to disregard a capital gain arising from the sale of the property under the small business 15-year exemption in section 152-110 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. It is accepted that the disposal of the property was considered and intended at the time your related entity sold the business it conducted from the property and therefore is in connection with the retirement of at least one of your significant individuals. While there may have been X years between each event, it is accepted that disposing of the property was always a part of the retirement plans of at least one of your significant individuals.

This ruling applies for the following period:

Income year ended 30 June 20XX

The scheme commences on:

DD MM YYYY

Relevant facts and circumstances

You are a private company which acquired a commercial property in 200X.

The property had been rented out throughout its ownership period to four or more tenants at any given time.

All the tenants were unrelated apart from one related-party tenant, Company B. Company B carried on a business using the property for more than 7 1/2 years until the business was sold to a 3rd party during the 201X financial year.

You received a private ruling which ruled the property satisfied the active asset test.

You and Company B are connected entities as per section 328-125 of the ITAA 1997.

The aggregated turnover for you and you connected entities and affiliates is under $2 million for the 202X income year.

You had intentions to dispose of the property at the time Company B sold the business.

You were advised by a real estate agent at that time that you would maximise a sale result if the property was tenanted.

During the 201X calendar year you had the expectation the purchaser of Company B's business would purchase the building once established in the building. They leased the property from you during that time but moved out at the end of 201X.

You spent the next two years trying to find a tenant with a number of potential lessors expressing interest or making offers, but none proceeded to a lease.

At the end of 20YY you found a tenant. A pandemic hit and tenant didn't pay rent and was forced to vacate in Month 20ZZ. Due to the pandemic, there was little to no interest in the property as a lease arrangement.

In Month 20ZZ you decided to sell the property without a tenant and received an offer in Month 20ZZ.

You entered a contract on DDMMYYYY to sell the property.

You have two directors who are both over 55 years old and have both always held over 20% of your shares.

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 152-10

Income Tax Assessment Act 1997 section 152-110

Income Tax Assessment Act 1997 paragraph 152-110(1)(d)(i)