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Edited version of private advice
Authorisation Number: 1052060024908
Date of advice: 18 November 2022
Ruling
Subject: CGT - small business 50% reduction
Question
Is the Deceased Estate entitled to the capital gains tax (CGT) small business 50% reduction on any capital gain resulted from the sale of the property pursuant to section 152-205 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
An entity can disregard 50% of a capital gain remaining after applying step 3 of the method statement in subsection 102-5(1) arising from a CGT event when the basic conditions under section 152-10 of the ITAA 1997 are satisfied for the gain.
In this case, the Deceased Estate has sold the asset (property) to an unrelated party which triggered CGT event A1 and resulted in a capital gain. The Deceased Estate has used the asset in the course of carrying on a business by it in partnership and the partnership was a CGT small business entity for the income year, and the Deceased Estate did not carry on a business in the income year (other than in partnership), and the CGT asset was not an interest in an asset of the partnership. The Deceased Estate has held the asset for less than 15 years and it has been used as an active asset for at least half of the period of ownership.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The deceased estate (the 'Deceased Estate') acquired the asset on the relevant date, the day of Individual's 1 death.
The asset was a farming property (the 'Property').
The Deceased Estate owned the property for under 15 years.
From the date of the Property acquisition, the deceased estate has carried on a farming enterprise on the Property in partnership with Individual 2.
Individual 2 passed away on the relevant date.
From the date of Individual's 2 death, the Deceased Estate continued to carry on the farming enterprise on the Property in partnership with the deceased estate of Individual 2 until the Property was sold.
The Deceased Estate has carried on a business in a partnership on the Property since the date of its acquisition until the sale date.
The Property was sold in the relevant year and the sale resulted in a capital gain.
The aggregated turnover of the partnership between the Deceased Estate and the deceased estate of Individual 2 is less than $X million.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 102-5
Income Tax Assessment Act 1997 section 128-15
Income Tax Assessment Act 1997 section 152-10
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Act 1997 section 152-40
Income Tax Assessment Act 1997 section 152-205