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Edited version of private advice
Authorisation Number: 1052364552207
Date of advice: 20 February 2025
Ruling
Subject: CGT - small business concessions
Question 1
Can you apply the small business capital gains tax concessions to the sale of the property?
Answer 1
No.
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 residential property (the property) over 20 years ago.
You are a director and employee the company.
Your spouse is the other director of the company.
For over 10 years from the purchase of the property the company used part of the residence for business purposes.
You then rented out the residential property for 10 years until it was sold in the 20XX-XX financial year.
You and the company relocated elsewhere, and the company continued running this business from another property.
The business operation did not return to the property.
The business turnover is less than $2 million.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 152
Income Tax Assessment Act 1997 section 152-10
Income Tax Assessment Act 1997 subsection 152-10(1A)
Income Tax Assessment Act 1997 paragraph 152-10(1A)(d)
Reasons for decision
All legislative references are to the Income Tax Assessment Act 1997 unless stated otherwise.
The small business CGT concessions allow you to reduce, disregard or defer some or all of a capital gain from an active asset used in a small business. The concessions are available when you dispose of an active asset and meet basic eligibility conditions.
Where an asset that you own is used in a small business by another entity that is your affiliate or connected to you, but not directly by you, it is known as being passively held.
To be eligible to use the small business CGT concessions where you have disposed of a passively held asset, there are additional conditions that must be met as set out in subsection 152-10(1A). In particular paragraph 152-10(1A)(d) which requires the CGT small business entity, in your case the company, to have carried on the business in relation to the CGT asset within the income year in which the CGT even occurred.
As the company did not use the property in its business within the 20XX-XX financial year this condition has not been met and therefore the small business CGT concessions set out in Division 152 will not apply to the sale of the property.