Edited version of private advice

Authorisation Number: 1052287801689

Date of advice: 12 August 2024

Ruling

Subject: CGT - small business 50% active asset reduction

Question

Are you eligible for the capital gains tax (CGT) small business 50% active asset reduction under section 152-205 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the sale of the property?

Answer

Yes.

Section 152-205 of the ITAA 1997 provides that a capital gain that arises from a CGT event happening to an active asset may be reduced by 50% if the basic conditions in Subdivision 152-A of the ITAA 1997 are satisfied.

In your case, the basic conditions are satisfied because:

•         a CGT event occurred when you disposed of the property

•         the event resulted in a gain

•         you are a partner in a partnership that is a small business entity and the CGT asset is an interest in a partnership asset

•         you owned the property for less than 15 years and the property was used in the business carried on by you in partnership for a total of at least half of your ownership period, and

Therefore, as you satisfy the basic conditions for small business relief, you will be eligible for the CGT small business 50% active asset reduction under section 152-205 of the ITAA 1997.

This ruling applies for the following period:

Year ended 30 June 2023

The scheme commenced on:

1 July 2022

Relevant facts and circumstances

You acquired a property as tenants in common with your siblings in equal shares.

You and your siblings carried on a business in partnership on the property throughout your entire ownership period.

You signed a contract of sale for the property and made a capital gain on its disposal.

You owned your interest in the property for less than XX years.

The partnership had an aggregate turnover of less than $Xmillion per annum.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-205

Income Tax Assessment Act 1997 Subdivision 152-A