Edited version of private advice

Authorisation Number: 1051957288346

Date of advice: 3 March 2022

Ruling

Subject: CGT - small business concessions

Question 1

Can the individual access the 50% active asset reduction in section 152-205 of the Income Tax Assessment Act 1997 (ITAA 1997) respect of the shares sold in Company A?

Answer

Yes, the individual satisfies the basic conditions in section 152-10 of the ITAA 1997 for the small business capital gains tax (CGT) concessions and the additional requirements associated with the sale of shares set out in subsection 152-10(2) of the ITAA 1997. Therefore the individual can apply the 50% active asset reduction to any capital gain made on the disposal of the shares.

Question 2

Can the Trust access the 50% active asset reduction in section 152-205 of the ITAA 1997 in respect of the shares sold in Company B and C?

Answer

Yes, the Trust satisfies the basic conditions for the small business CGT concessions and the additional requirements associated with the sale of shares set out in subsection 152-10(2) of the ITAA 1997. The Trust has also satisfied subparagraph 152-10(2)(d)(ii) as Individual B is a CGT concession stakeholder of both Company B and C and has a small business participation percentage in the Trust of more than 90%. Therefore the trust can apply the 50% active asset reduction to any capital gain made on the disposal of the shares.

This private ruling applies for the following period:

Year ended 30 June 2020

The scheme commences on:

1 July 2019

Relevant facts and circumstances

This private ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Individual A owned shares in 3 private companies, either directly or through an interposed entity.

Individual A held X% of the shares in Company A, with the remaining shares held equally by his 2 business partners.

Individual A is the trustee of the Trust.

The Trust owned X% of the shares in Company B, with the remaining shares held equally by the Family Trusts of his 2 business partners.

The Trust owned X% of the shares in Company C, with the remaining shares held equally by the Family Trusts of his 2 business partners.

All directors and shareholders agreed that Individual A would exit the businesses, with the shares owned by him and his Family Trust being bought back by the companies and cancelled.

The share buy back/disposal occurred in the 2020 financial year.

Individual A is not a small business entity with an aggregated turnover of less than $2 million.

Neither Individual A or the Trust carried on a business just before the CGT event.

Individual A and the Trust satisfy the maximum net asset value test (MNAVT).

The shares disposed of by Individual A and the Trust satisfy the modified active asset test.

Individual B, the spouse of Individual A, also satisfies the $6 million MNAV test.

Company A, B and C individually passed the MNAVT. If they are considered connected or affiliated then they jointly also pass the MNAVT.

Individual B received X% of the distributions of trust income from the Trust in the CGT event year.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-10

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

Income Tax Assessment Act 1997 subparagraph 152-10(2)(d)(ii)

Income Tax Assessment Act 1997 section 152-55

Income Tax Assessment Act 1997 section 152-60

Income Tax Assessment Act 1997 section 152-205