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Edited version of private advice
Authorisation Number: 1052180646491
Date of advice: 19 October 2023
Ruling
Subject: CGT - small business concessions
Question 1
Can the company disregard the capital gain from the disposal of the land in accordance with Subdivision 152-B of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. The company intends to dispose of the land in the 20XX income year and make a capital gain. The company is a small business entity with an aggregated turnover of less than $Xm. The land is an active asset as it was used in a business carried on by a connected entity. The company has owned the land for more than 15 years and had a significant individual for at least 15 years who is over 55 years old. The sale of the land is in connection with the significant individual's retirement. Therefore, the company can disregard the capital gain made from the disposal of the land.
Question 2
Will the distribution of the gain by the company to person A, person B and person C be an exempt amount and as such not assessable income of the individuals, in accordance with section 152-125 of the ITAA 1997?
Answer
Yes. The capital gain made on the disposal of the land is exempt and the company will make a one or more payments relating to the exempt amount to a CGT concession stakeholder within 2 years of the CGT event. Person A, B and C are CGT concession stakeholders just before the CGT event. The distributions to person A, B and C are exempt and no assessable income.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commenced on:
1 July 2022
Relevant facts and circumstances
The company is a small business entity with an aggregated turnover of less than $Xm. Activities of the company include stock grazing, rental activities, income from infrastructure and agistment income.
The company acquired land (the land) prior to XX September 19XX.
Person A and their spouse carry on a business in partnership. The partnership has used the land in their business of sheep grazing for several years. The partnership is a connected entity of the company.
The land has at all relevant times been predominantly used for grazing by the partnership.
The sole owner of the shares in the company is a trust. The trust's beneficiaries are person A, person B, person C and two others. The trustee company's directors are person A and B. Trust distributions are as follows:
Table 1 Distribution Table
|
20XX |
100% distribution to person A |
|
20XX - 20XX |
Nil distributions, no net income |
|
20XX |
100% distribution to person A |
|
20XX |
Nil distributions, no net income |
|
20XX |
Nil distributions, no net income |
In the 20XX income year, the trust will distribute at least 20% of trust income to each person A, B and C and they will be CGT concession stakeholders for the 20XX income year.
The company intends to dispose of the land in the 20XX income year.
The company will make payments relating to the gain made on the land to person A, B and C within 2 years of the date of disposal of the land.
Person A is over 55 years old and is seeking to retire.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 152-A
Income Tax Assessment Act 1997 Subdivision 152-B
Income Tax Assessment Act 1997 section 328-125