| Disclaimer You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private advice
Authorisation Number: 1052072808534
Date of advice: 20 December 2022
Ruling
Subject: CGT - permanently incapacitated
Question
Is the taxpayer deemed to be permanently incapacitated for the purposes of subparagraph 152-110(1)(d)(ii) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The taxpayer was born in 19XX.
The taxpayer has been diagnosed with terminal cancer.
In 20XX the taxpayer received a terminal illness payout from an insurance provider.
The taxpayer is a significant individual of a related company that had a CGT event in the same income year as this ruling.
Relevant legislative provisions
Income Tax Assessment Act 1997 subparagraph 152-110(1)(d)(ii)
Reasons for decision
The term 'permanently incapacitated' is not defined for the purposes of the capital gains tax (CGT) provisions; however, the term has been used in relation to the retirement and superannuation provisions which provide some indication of its meaning for the purposes of the CGT 15-year exemption.
The Australian Taxation Office outlines its view on permanent incapacitation on its website where it states, at QC 52288:
"Whether an individual is permanently incapacitated at the time of the CGT event depends on the particular circumstances of each case. Based on the meaning of the term 'permanent incapacity' in retirement and superannuation law, an indicative description is:
Ill health (whether physical or mental), where it is reasonable to consider that the person is unlikely, because of the ill health, to engage again in gainful employment for which the person is reasonably qualified by education, training or experience. The incapacity does not necessarily need to be permanent in the sense of everlasting."
Therefore, the Commissioner considers that the taxpayer, a significant individual to a related company, is permanently incapacitated for the purposes of subparagraph 152-110(1)(d)(ii) of the ITAA 1997.
This ruling only considers whether the taxpayer, as a significant individual of a related company, is permanently capacitated; this ruling does not consider other requirements of section 152-110 of the ITAA 1997.