Edited version of private advice

Authorisation Number: 1052190238334

Date of advice: 8 November 2023

Ruling

Subject: CGT - 15 year exemption

Question 1

Are you entitled to use the 15-year exemption in section 152-105 of the Income Tax Assessment Act 1997 (ITAA 1997) on your original interest in Property B, Property C and Property E?

Answer

Yes. As the basic conditions will be satisfied when the property is sold, and, you are over 55 years of age, you have continuously owned the properties for the 15-year period ending just before their transfer, and the event that will occur will be in connection with your retirement, you can choose to apply the 15-year exemption, disregarding the capital gain made on the disposal of the property.

Question 2

Are you entitled to the retirement exemption in section 152-305 of the ITAA 1997 on your inherited interest in the properties at Property A, Property B and Property D?

Answer

Yes. In this case you are over 55 and you satisfy the basic conditions. You are eligible to reduce your gain by applying the small business retirement exemption up to your lifetime limit of $500,000. Additionally, as you're over 55 years there is no requirement to pay any amount into a complying superannuation fund or retirement savings account. However, you must keep a record of the amount you choose to disregard. Further information can be found by searching 'QC 52290' on ato.gov.au

Question 3

Will the Commissioner exercise his discretion in section 152-80 of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the time limit allowed for the transfer of Property C and Property E until 30 June 2024?

Answer

Yes. Having considered your circumstances and the relevant factors, particularly in relation to the delays caused by your ill health, the Commissioner will exercise the discretion and extend the time limit to 30 June 2024.

Question 4

Are you entitled to the 15-year exemption in section 152-105 of the ITAA 1997 in the same way your spouse would have been for properties at Property C and Property E?

Answer

Yes. Immediately prior to their death, your spouse would have satisfied all of the relevant conditions for the 15-year exemption in relation to Property C and Property E. The basic conditions would have been satisfied, your spouse was over 55 at the time of death and had owned the properties for more than 15 years. Accordingly, you are eligible to apply the 15-year exemption in relation to the transfer of the properties.

This ruling applies for the following period:

Year ended 30 June 2023

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

You and your spouse owned 5 titles of land. The titles are agricultural land, including dwellings, and are used by your business for agricultural purposes.

You and your spouse ran a farming partnership on the land for many years. The partnership ceased when your spouse passed away recently. They were over 55 years of age at the time of their death. You have continued to run an agricultural business on the land as a sole trader since that date.

You are over 55 and ready to retire. You would like to transfer the titles to your children and intend on retiring as a result of the transfer.

The business has a turnover of less than $Xmillion.

The properties are as follows:

1)    Property A - You and your spouse acquired this property before 20 September 1985. You are now the sole owner of the property

2)    Property B - Your spouse inherited 50% of the property 20 September 1985. You acquired the other 50% of the property over 15 years ago but after 20 September 1985. You inherited your spouse's 50% interest under the terms of his will and are the sole owner of the property

3)    Property C - You and your spouse each acquired 50% of the property over 15 years ago but after 20 September 1985. You have now inherited your spouse's 50% interest under the terms of his will and are the sole owner of the property

4)    Property D - you and your spouse purchased this property before 20 September 1985. You are now the sole owner of this property

5)    Property E - you and and your spouse purchased this property over 15 years ago but after 20 September 1985. You are now the sole owner of this property.

Your spouse passed away suddenly. There were significant delays in putting together the information for probate as your spouse controlled all of the financial matters and there were many assets discovered that you were unaware of.

After your spouse passed away you were required to undergo a number of surgeries. All operations were successful but led to further time being required to apply for probate.

Once you were well enough the family met to discuss a succession plan for the farm and with their accountant's advice sought legal expert advice in relation to the CGT exemptions and concessions. The family were in a position within two years of your spouse's death to transfer the land to your children. They received professional expert advice confirming that the small business concessions were applicable but that it would be prudent to apply for a private ruling before proceeding.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-80

Income Tax Assessment Act 1997 section 152-105

Income Tax Assessment Act 1997 section 152-305