Edited version of private advice

Authorisation Number: 1052366834219

Date of advice: 19 March 2025

Ruling

Subject: CGT - small business concessions

Question 1

Does the company satisfy the basic conditions to access the small business CGT concessions in subdivision 152-A of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

Yes, the company satisfies the basic conditions to access the small business CGT concessions.

Question 2

Will the company be able to apply the 15-year exemption in section 115-110 of the ITAA 1997 to disregard the capital gain upon the sale of the property?

Answer 2

Yes, the company satisfies the requirements in section 152-110 of the ITAA 1997 to disregard the capital gain upon the sale of the property.

Question 3

Will the distribution of the proceeds of the sale of the property to the shareholders be exempt under section 152-125 of the ITAA 1997?

Answer 3

Yes, the proceeds from the sale of the property will be an exempt distribution paid to the shareholders if the payment is made in accordance with section 152-125 of the ITAA 1997.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The company owns a property that was used in the business operated by a trust.

The company has X individual shareholders who are over 55 years old.

The same X individuals control the corporate trustee of the trust and operate the business.

Since the acquisition of the property, the company has leased the property to the trust, where the trust has used the property to conduct its business for over XX years.

Some warehouse space in the property was considered excess to the needs of the business and the trust has sub-leased the excess warehouse space to an unrelated third party for over XX years.

The trust made a family trust election, with one of the individuals names as the specified individual.

The specified individual makes all the relevant business decisions.

The other individual has acted in accordance with the specified individual's wishes with respect to major business decisions.

The child of the X individuals and their spouse, control a corporate investment entity, Company X.

Both individuals have been employed by the business up until 30 June 20XX.

Due to their age, the X individuals have only been working part time in the business.

The X individuals expressed to both their children that they would like to retire from the business and transition the business to Company X.

To facilitate the cessation of operations, effective from 1 July 20XX, the trust entered into an agreement with Company X to transfer some existing contracts and clients. It is understood that the transfer was undertaken for nil consideration due to the market in which the business operates.

The company intends to sell the Property during the 20XX-XX financial year. They have received an offer for the property.

The maximum net asset value of all relevant entities is less than $6 million.

The property was an active asset used in the business of a connected entity.

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 152-20

Income Tax Assessment Act 1997 section 152-35

Income Tax Assessment Act 1997 section 152-40

Income Tax Assessment Act 1997 section 152-50

Income Tax Assessment Act 1997 section 152-55

Income Tax Assessment Act 1997 section 152-105

Income Tax Assessment Act 1997 section 152-110

Income Tax Assessment Act 1997 section 152-125