Edited version of private advice

Authorisation Number: 1052318691397

Date of advice: 16 October 2024

Ruling

Subject: CGT - small business 15-year exemption

Question

Is the capital gain from the sale of your interest in the property exempt from capital gains tax (CGT) as a result of the application of the small business 15-year exemption in Subdivision 152-B of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2025

The scheme commenced on:

1 July 2024

Relevant facts and circumstances

You carry on a business.

Over 15 years ago you purchased a property that has been used exclusively and continuously in your business.

No part of the Property has been rented.

A contract for the sale of the Property has been entered into.

You are over 55 years old and will retire when settlement of the sale is completed.

Your aggregated turnover is under $Xm.

The total net value of CGT assets owned by you, your connected entities, and your affiliates is under $X million.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 152-A

Income Tax Assessment Act 1997 Subdivision 152-B

Income Tax Assessment Act 1997 section 152-105

Reasons for decision

Section 152-105 of the ITAA 1997 provides a small business 15-year exemption for individuals. Under this section, you can disregard the capital gain made on the disposal of a CGT asset if you:

(a)    satisfy the basic conditions for the small business CGT concessions in Subdivision 152-A of the ITAA 1997

(b)    continuously owned the CGT asset for the 15-year period ending just before the CGT event, and

(c)     are at least 55 years old at the time of the CGT event and the event happens in connection with your retirement, or are permanently incapacitated at that time.

In your case, the basic conditions contained in Subdivision 152-A of the ITAA 1997 are satisfied because:

•         a CGT event occurred when you entered into a contract to dispose of your interest in the property

•         the event resulted in a gain

•         you or your affiliate was a small business entity at the time of the event

•         you owned your interest in the property for more than 15 years and the property was used in your business, or in a business carried on by an affiliate or a connected entity, for a total of at least 7½ years of their ownership period

In addition,

•         you continuously owned your interest in the property for the 15-year period ending just before the CGT event

•         you were at least 55 years old when you disposed of the property, and

•         the disposal happened in connection with your retirement.

Therefore, you qualify for the small business 15-year exemption in section 152-105 of the ITAA 1997 in relation to your interest in the property. You can disregard your share of the capital gain made on its disposal.