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Edited version of private advice
Authorisation Number: 1052203407945
Date of advice: 19 December 2023
Ruling
Subject: CGT - small business concession
Question 1
Is the property an active asset in accordance with section 152-35 and 152-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. The property meets the active asset test under section 152-35 and 152-40 of the ITAA 1997 because the unit trust owned the property for more than 15 years and the asset was active the entire time.
Question 2
Does the property qualify for the Capital Gains Tax (CGT) small business 15-year exemption in section 152-110 of the ITAA 1997?
Answer
Yes. The unit trust is a small business entity for the income year. Person A is connected to the unit trust who owned the property for more than 15 years and it was used in business by another connected discretionary trust then by Person A from 2005 to 2023. The property was continuously owned for a 15-year period before the CGT event. Person A is over 55 years and has now retired as a result of the sale.
This ruling applies for the following period:
Year ending June 2023
The scheme commenced on:
1 July 2022
Relevant facts and circumstances
The unit trust purchased a rural property (the property).
The sole director of the trustee company and 100% unit holder of the unit trust is Person A.
The property was initially leased to a related discretionary trust for its primary production business. A residential house was also constructed upon the property and occupied by Person A and his family.
In the 20XX financial year, the discretionary trust transferred the business assets of the primary production business to Person A in their capacity as sole trader carrying on a business.
Person A continued to operate the business until they closed the business in conjunction with the sale of the property in June 20XX.
As a result of this property sale, Person A has now retired (age over 55 years old).
Person A has held more than 20% of the units trust since February 20XX. On 30 June 20XX, Person A's unit holding increased to 100%.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 152-A
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
Income Tax Assessment Act 1997 section 152-110