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Edited version of private advice
Authorisation Number: 1051974868191
Date of advice: 29 June 2022
Ruling
Subject: CGT - small business concessions
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. The Taxpayer met all four conditions under section 152-110 of the ITAA 1997 to apply the 15-year exemption:
(a) the Taxpayer satisfied the basic condition for relief in Subdivision 152-A of the ITAA 1997,
(b) the Property was owned for more than 15 years,
(c) the Taxpayer had a significant individual for at least 15 years, and
(d) just before the CGT event, the significant individual was over 55 and intended to retire. It is accepted that the disposal of the property was considered part of the retirement plan and therefore in direct relation to the retirement of the significant individual.
This ruling applies for the following period:
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
A company (the Taxpayer) was formed and two individuals being the directors with each held 50% shares. There has been no share structure change. They are therefore considered significant individuals of the Taxpayer since its formation.
The Taxpayer purchased a property over 15 years ago. The property was solely used in the course of carrying on its business until the date of the contract of the Property sale (the CGT event). It satisfied the active asset test under section 152-35 of the ITAA 1997.
The Property was disposed for an amount of X in the 20XX/XX financial year.
The CGT event resulted in a capital gain.
The Taxpayer had a net value of the CGT assets of $x which includes the building at cost.
It is estimated that the total of the Taxpayer's, their connected entities' and affiliates' net value of the CGT assets will not exceed $X million in the 20XX/XX financial year.
The Taxpayer estimated that they will have an aggerated turnover under $X million in the 20XX/XX financial year.
The Taxpayer will cease its business operation following the settlement of the Property sale.
Just before the CGT event, one significant individual was over 55 years of age and intended to retire.
Assumptions
The following estimations are made by the Taxpayer and are consider reliable:
• they will not exceed the maximum net asset value test of $X million in the 20XX/XX financial year
• they will have an aggerated turnover under $X million in the 20XX/XX financial year.
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 152-100