Edited version of private advice

Authorisation Number: 1051957938107

Date of advice: 10 March 2022

Ruling

Subject: CGT - small business basic conditions

Question 1

Do you satisfy the basic conditions for the small business capital gains tax (CGT) concessions in Subdivision 152-A of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the post CGT property?

Answer

Yes. A CGT event happened in relation to an asset you owned, the event resulted in a capital gain, you satisfy the maximum net asset value test and the asset in question satisfies the active asset test. Therefore you satisfy the basic conditions for the small business CGT concessions.

Question 2

Do you satisfy the conditions for the 15-year exemption in Subdivision 152-B of the 1997 in relation to the post CGT property?

Answer

Yes. The basic conditions have been satisfied, you owned the property for more than 15 years, you are over 55 and the event occurred in connection with your retirement or because you are permanently incapacitated. Therefore you can choose to apply the 15-year exemption and disregard any capital gain made in relation to the disposal of the post CGT property.

Question 3

If you do not apply the 15-year exemption in Subdivision 152-B of the ITAA 1997 do you satisfy the conditions for the small business 50% reduction in Subdivision 152-C of the ITAA 1997 and the small business retirement exemption in Subdivision 152-D of the ITAA 1997 in relation to the post CGT property?

Answer

Yes. If you do not choose to apply the 15-year exemption you can use the small business 50% reduction in 152-C of the ITAA 1997 as the basic conditions have been satisfied.

You can choose to apply the retirement exemption up to the lifetime limit of $500,000. As you are over 55 years of age there is no requirement to contribute an amount to a complying superannuation fund.

This private ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Individual A and B jointly own several properties.

Lot X was acquired in 19XX and a building (building 1) was constructed on that land in 19XX.

Lot Y was acquired in 19XX and a building (building 2) was constructed on that land in 19XX.

In 19XX a contract to build a third building (building 3) partly on lot X and partly on lot Y was executed. This building connects the first and second buildings so that the complete structure is in a 'U' shape.

Lot Y, building 2 and building 3 are collectively referred to as 'the post CGT property'.

Individual A and B carried on a business through a company on the property from the date of acquisition.

Individual A and B owned an equal number of shares in the company.

The company carried on the business from the land until 20XX when the business was sold.

The land has been leased to tenants since June 20XX.

Individual A and B are both over 55 years of age.

Individual A and B decided that due to their age and health it was time to retire and sell the property.

The property was sold in the 20XX financial year resulting in a capital gain.

Individual A and B satisfy the maximum net asset value test.

Individual A and B have had ongoing responsibility for maintenance spending anywhere between X to X hours a week on the property.

Individual A and B will have a significant reduction in working hours once the property is sold.

Individual B has a chronic health condition and a letter from their physician states they should reduce their workload immediately to protect their health.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 152-A

Income Tax Assessment Act 1997 Subdivision 152-B

Income Tax Assessment Act 1997 Subdivision 152-C

Income Tax Assessment Act 1997 Subdivision 152-D