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Edited version of private advice
Authorisation Number: 1052129364547
Date of advice: 23 June 2023
Ruling
Subject: CGT - 15 year exemption
Question
Will the payment from The Entity to Person A be exempt under section 152-125 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. The payment will be disregarded as subparagraph 152-125(1)(a)(iii) of the ITAA 1997 is relevant in these circumstances. Subparagraph 152-125(1)(a)(i) would have applied to the amount except that the capital gain was disregarded anyway because the relevant CGT asset was acquired before 20 September 1985.
Further information on such exempt distributions can be found by searching QC 52288 on the ATO website www.ato.gov.au.
This ruling applies for the following period:
Year ending 30 June 2023
The scheme commenced on:
1 July 2022
Relevant facts and circumstances
The entity purchased the property in 19XX for $XXX,000.
The entity has 2 shareholders The entity itself which holds 1 ordinary share and person A who owns 644 6% cum preference shares.
The entity has the following shareholder person A who owns ordinary and A class shares.
The land consisted of 983 acres of farmland.
Between 19XX to 20XX the land owned by the entity was used by a farming partnership operated by person A and their relative person B.
The partnership ended when person B passed away.
From 2014 the property was leased to another partnership operated by person A's nephew and nieces until 2019 when person A's nephew solely took over the lease.
The property was sold in December 20XX.
The entity made a capital gain.
Person A wants to elect to apply the 15-Year exemption and contribute the GCT lifetime cap into their superannuation fund.
Person A is considered a significant individual and the event is considered in course of retirement for the purposes of applying the 15-year exemption.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 292-100(2)
Income Tax Assessment Act 1997 Subsection 152-35(1)
Income Tax Assessment Act 1997 Section 152-125