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Edited version of private advice
Authorisation Number: 1052114600750
Date of advice: 12 May 2023
Ruling
Subject: CGT - 15-year exemption - in connection with retirement
Question
Will the sale of your interest in the service practise be 'in connection with your retirement' for the purposes of the capital gains tax (CGT), small business, 15-year exemption?
Answer
Yes.
We consider the CGT event is in connection with your retirement for the purpose of subparagraph 152-105(d)(i) of the Income Tax Assessment Act 1997 ITAA 1997). Although you will be required to work for a period of two years as part of the sale contract, there is a clear link between the sale of the business and your retirement.
This ruling applies for the following period:
Year Ending 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You commenced operating a service practise (the practise) as a sole trader more than XX years ago.
You sold half of the practise approximately XX years ago. You met the basic conditions in section 152-10 of the (ITAA 1997) at that time, with the capital gain reduced to zero using the 50% general discount, 50% active asset reduction and small business retirement exemption.
The partnership operated the practice until it was recently sold.
Prior to the sale, you worked approximately 40 to 50 hours a week inclusive of managerial duties.
The responsibilities included both clinical and managerial tasks related to the practise.
You are currently aged over 55 years of age and the sale proceeds from the sale will be used to fund your retirement.
As part of a condition of the sale contract, you are required to work for 35 hours a week for a period of two years following settlement. Approximately eight hours a week will consist of management duties.
You will retire once this two-year employment contract period has expired. You currently have no work plans post this two-year period, at most, you may work a couple of days a week on a casual basis.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-105