Edited version of private advice

Authorisation Number: 1052042589973

Date of advice: 8 November 2022

Ruling

Subject: CGT 15-year exemption

Question 1

Will capital gains tax (CGT) event A1 occur when you enter into the Contract to dispose of the Property pursuant to section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

After considering all the facts and circumstances of the case, the Commissioner is satisfied that CGT event A1 will occur when you dispose of the Property. The event occurs in the 20XX income year.

Question 2

Will you satisfy the requirements of Division 115 of the ITAA 1997 to apply the 50% CGT discount on the disposal of the Property?

Answer

Yes.

Section 115-5 of the ITAA 1997 states you can apply the discount to a capital gain that meets the requirements of sections 115-10, 115-15, 115-20 and 115-25. Since you are an individual that disposed of the Property after 21 September 1999, have owned the Property for more than 12 months, and the cost base has been calculated without reference to indexation, you are entitled to the 50% discount capital gain.

Question 3

Will you satisfy the requirements of section 152-105 of the ITAA 1997 to apply the 15-year exemption on the disposal of the Property?

Answer

Yes.

You can entirely disregard a capital gain arising from a CGT event when the basic conditions are satisfied, you continuously own the CGT asset for the 15-year period ending just before the CGT event and if you are 55 or over at the time of the CGT event and the event happens in connection with your retirement.

You satisfy the basic conditions because you are a partner in a partnership that is a CGT small business entity for the income year, and the CGT asset is an asset you own which is used in the business of the partnership. The Property has been held for more than 15 years and an active asset for at least 7.5 of those years. You are over the age of 55 years old at the time of the CGT event and the event happens in connection with your retirement.

This ruling applies for the following period:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are partners in a partnership. The partnership is a small business entity.

You acquired land (the Property) and commenced running a business of primary production on the Property.

You do not reside on the Property and reside elsewhere.

You owned the Property for more than 15 years.

You entered into contract (the Contract) to sell the Property.

The Contract states the following:

•         the sale price is to be paid by a deposit of followed by annual instalments with the balance payable on the last anniversary,

•         any unpaid amounts attract interest,

•         you must continue to use the Property for primary production until Settlement,

•         settlement can occur sooner,

•         the Purchaser does not have the right to possess or occupy, or use and enjoy, the Property prior to Settlement.

•         The deposit and required instalments have been all been paid.

You are over the age of 55 and intend to retire permanently from the workplace.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 115-5

Income Tax Assessment Act 1997 section 115-10

Income Tax Assessment Act 1997 section 115-15

Income Tax Assessment Act 1997 section 115-20

Income Tax Assessment Act 1997 section 115-25

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 section 152-105