Edited version of private advice

Authorisation Number: 1052255557243

Date of advice: 31 May 2024

Ruling

Subject: CGT - small business concessions

Question 1

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

Answer

Yes. The Company will meet the basic conditions in subsection 152-10(1) of the ITAA 1997 regarding the disposal of the Property. CGT event A1 occurred resulting in a gain and the Company is considered a CGT small business entity during the 202A-2B income year. The active asset test has been satisfied as the Company owned the Property for over 15 years and it was used in the Company's business for over 7.5 years. The rental exclusion did not apply.

Question 2

Is the Company entitled to the 15-year exemption pursuant to section 152-110 of the ITAA 1997?

Answer

Yes. The Company satisfies the basic conditions as per Question 1 above. The Property was continuously owned by the same party for more than 15 years prior to the CGT event and the Company had a significant individual for a total of at least 15 years who was over the age of 55 years old and transitioned to retirement at the time of the event. Therefore, the Company can disregard the capital gain made on the disposal of the Property.

This ruling applies for the following period:

Year ended 30 June 202B

The scheme commenced on:

1 July 202A

Relevant facts and circumstances

The Company was incorporated in 19XX.

In 200Y, Person A became the sole director and shareholder of the Company. Person A is the Significant Individual of the Company.

Person A is over the age of 55 years old and has transitioned to retirement.

In 200Z, the Company acquired vacant land (the Property) to use in its business.

Throughout the period of ownership, the company used the Property in business and rented the Property for various periods. The business use exceeded 7.5 years.

In 201A, construction of commercial units commenced.

The Company did not satisfy the CGT small business entity test in some years however, did in most years of trade including the year the Property was sold.

In 202B, the Company began winding down trading and by 30 June 202B, the trading activities were fully wound down and business assets had been sold or otherwise disposed of.

The Property was sold in the 202A-2B income year.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 section 152-15

Income Tax Assessment Act 1997 section 152-35

Income Tax Assessment Act 1997 section 152-40

Income Tax Assessment Act 1997 section 152-110