Edited version of private advice

Authorisation Number: 1052077215860

Date of advice: 13 February 2023

Ruling

Subject: CGT - 15 year exemption - in connection with retirement

Question

Did you satisfy the requirements in subparagraph 152-110(1)(d)(i) of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the disposal of The Property?

Answer

Yes. An individual who was a significant individual of you just before you disposed of the property was 55 or over at that time and the disposal happened in connection with the significant individual's retirement. Further information about the small business 15-year exemption can be found by searching for 'QC 52288' on ato.gov.au

This ruling applies for the following period

Year ended 30 June 20XX

The scheme commenced on

1 July 20XX

Relevant facts and circumstances

You are a discretionary trust established XX Month 20XX.

Since your establishment Individual Y and Z (The Trustees) have held the role of joint Trustee while individual Y is the sole Appointor and Guardian. Individual Y and Z are also beneficiaries of you.

You acquired the property more than 15 years ago.

The Trustees ran two businesses (A and B) on the property for more than 7 ½ years after it was acquired.

Individual Y worked full time in the business working at least 40 hours a week or up to 60-100 hours a week depending on the time of year and seasonal work requirements.

Business A ceased in XXXX.

Business B ceased in XXXX.

The Trustees did not retire nor intend to retire when Business B activities ceased.

The property was initially listed for sale however after a short period of time The Trustees decided to remove it from the market.

The property was not sold at the time the business ceased as The Trustees wanted the property to be available to their children to farm should this be the directions their future took.

It was therefore decided to lease the property to an unrelated party to use in another business, giving The Trustees children time to reflect on their future. This also gave time for The Trustees to explore employment options.

During the period the property was leased to the unrelated third party:

•         Individual Y continued in regular paid employment in the local farming and agricultural community, including harvesting, seeding, farm chemical supply and spraying, as well as assisting the lessee in transporting grain, and

•         Individual Z was employed part time, as well as assisted the lessee in arranging grain contracts.

At a family meeting in XXXX the children of the Trustees indicated that they would not be returning to the farm. As a result it was decided that the property would be sold.

The sale of the property was an integral part of The Trustees retirement plan as it would allow them to stop working and allow you to purchase a smaller property for an ongoing farming interest to provide for retirement.

You bought new land suitable for business. The business (Business C) is on a significantly smaller scale than what was previously operated on the previous property sold and the day-to-day operations have been contracted out to a manager.

Business C will require minimal involvement from the Trustees other than high-level oversight and administration and office duties (approx. 10-15 hours per week).

A contract was entered into for the sale of the property in XXXX to an unrelated buyer.

Both Trustees are over 55 years old and are significant individuals of you.

Relevant legislative provisions

Income Tax Assessment Act 1997 paragraph 152-110(1)(d)(i)