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Edited version of private advice
Authorisation Number: 1052207478133
Date of advice: 19 February 2024
Ruling
Subject: CGT - small business concessions
Question 1
Do you satisfy the condition under subparagraph 152-10(1)(c)(iv) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes, in this case we consider that 152-47 of the ITAA 1997 will apply to deem your spouse to be your affiliate. Your spouse is the sole shareholder of the company, a capital gains tax (CGT) small business entity, which operates a business from the commercial property you own. We consider you are connected with the company, in accordance with 328-125(2) of the ITAA 1997, as it is controlled by your affiliate.
You will satisfy the condition under subparagraph 152-10(1)(c)(iv) of the ITAA 1997 as the company is connected with you and is a CGT small business entity for the income year. Further you did not carry on a business in the income year and the company carried on a business (as referred to in subparagraph 152-40(1)(a)(iii)) in relation to the commercial property.
Question 2
Does the property satisfy the active asset test under section 152-35 of the ITAA 1997?
Answer
Yes, you have owned the commercial property for more than 15 years and it has been used by a connected entity in the course of carrying on a business for more than 7 ½ years. Therefore, the property will satisfy the active asset test set out in section 152-35 of the ITAA 1997.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You purchased a commercial property in the financial year ending 19XX.
The property has been used during the entire ownership period by a connected entity to operate a small business.
Your spouse was a 100% shareholder of the company.
The company was a small business entity, with turnover of less than $2 million for the financial year ending 30 June 20XX.
You did not carry on a business.
The property has derived income through rent from the company.
The property was sold in 20XX. The company's business also ceased to operate from this date.
The sale of this property has resulted in a capital gain.
Your spouse's company is not your affiliate.
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 section 152-47
Income Tax Assessment Act 1997 section 328-152