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Edited version of private advice
Authorisation Number: 1052356234916
Date of advice: 30 January 2025
Ruling
Subject: CGT - small business concessions
Question
Is the company eligible for the 15-year exemption under section 152-110 of the Income Tax Assessment Act 1997 (ITAA 1997) for the sale of the business?
Answer
No.
This ruling applies for the following period:
Year ended 30 June 20YY
The scheme commenced on:
1 July 20YY
Relevant facts and circumstances
The company signed a contract to purchase the business as a going concern in MM 20YY.
The business had several employees and intended to continue to trade the business for over 15 years.
The company had given written notice to the franchisor and received confirmation of such extension that was going to be imminently executed prior to the commencement of the buyback process.
Due to factors outside the company's control the parent company of the franchisor made the decision to wind up the business.
The Settlement Deed and supporting Deed of Termination and Release were executed with an effective date of MM 20YY.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-110
Reasons for decision
Section 152-110 of the ITAA 1997 says that for the company to be eligible for the small business 15-year exemption it must satisfy the basic conditions and three further conditions:
• the company continuously owned the CGT asset for the 15-year period ending just before the CGT event;
• the company had a significant individual for a total of at least 15 years (even if the 15 years was not continuous and it was not always the same significant individual) during which the Trust owned the CGT asset;
• either:
- the significant individual is 55 or over at the time of the CGT event and the event happens in connection with their retirement; or
- the significant individual is permanently incapacitated at the time of the CGT event.
Whether a CGT event happens in connection with an individual's retirement depends on the particular circumstances of each case. A CGT event may be in connection with your retirement even if it occurs at some time before retirement.
Application to your circumstances
The company has not owned the business for 15 years therefore the company is not eligible for the 15-year exemption under section 152-110 of the ITAA 1997.