Edited version of private advice

Authorisation Number: 1052183421112

Date of advice: 25 October 2023

Ruling

Subject: CGT - small business concessions

Question 1

Will the disposal of the property satisfy the small business capital gains tax (CGT) concessions basic conditions in section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. The net asset value of the company and its connected entities, affiliates and entities connected of their affiliates is less than $6m. The property was used in a business carried on by a connected entity for more than half of the period of ownership. Therefore, the company satisfies the basic conditions for the small business CGT concessions.

Question 2

Will the disposal of the property satisfy the conditions of the 15-year exemption in Subdivision 152-B of the ITAA 1997?

Answer

Yes. The company satisfies the small business CGT concessions basic conditions. The company continuously owned the property for at least 15 years and had a significant induvial for that period. At the time of disposal of the property, the significant individual was over 55 years old and the disposal was in connection with retirement. Therefore, the company satisfies the conditions for the 15-year exemption on disposal of the property.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 19XX

Relevant facts and circumstances

Company A purchased the property in 19XX.

Company A's only activity is the rental of commercial properties, and it has never carried on a business.

Company A rented the property to a connected entity, company B. Company B carried on a business and used the property to store inventory for over XX years.

In 20XX the property was listed for sale with a real estate agent who consistently advertised the property through various means, monitored contact lists and contacted potential buyers. Despite the efforts made, the property remained vacant until the sale of the property in 20XX.

The net asset value of company A and its connected entities was less than $6 million at the time of disposing of the property. Company A has no affiliates.

Both company A and B are connected entities as both entities are controlled by the same individual.

There has been a significant individual of company A for at least 15 years. The significant individual was over the age of 55 at the time of sale of the property. The significant individual has not worked since 20XX and is retired.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 section 152-35

Income Tax Assessment Act 1997 section 152-40

Income Tax Assessment Act 1997 subdivision 152-B