Private ruling: Small business CGT concessions
Date of advice: 2 December 2021
Published: March 2022
Ruling period: Year ended 30 June XXXX
Date scheme commenced: 1 July XXXX

Ruling: Q1: Is the property owned by the trust an 'active asset' under section 152-40 of the Income Tax Assessment Act 1997 ? | A1: Yes, the property owned by the trust is an active asset under section 152-40 of the Income Tax Assessment Act 1997 . | Q2: Does Person 2 control the trust? | A2: No, Person 2 does not have control of the trust. | Q3: Does Person 2 have sufficient influence over the trust? | A3: No, Person 2 does not have sufficient influence over the trust even as a joint appointor (with Person 1) of the trust. | Q4: Can the trust apply the Small Business CGT Concessions on the disposal of the property? | A4: Yes, the Trust is eligible to apply the Small Business CGT Concessions on the disposal of the property. | Q5: Is the trust eligible to apply the Small business retirement exemption on the disposal of the property under Subdivision 152-D of the Income Tax Assessment Act 1997 ? | A5: Yes, the trust is eligible to apply the Small business retirement exemption on the disposal of the property under Subdivision 152-D of the Income Tax Assessment Act 1997 .

Relevant facts and circumstances: The trust is a family discretionary trust. The trust acquired the first property was in late December XXXX and the trust subsequently acquired more land in late December XXXX. The properties were used by the partnership from the dates they were acquired in carrying on the partnership primary production business, which is also the date the partnership started. Person 1 is a significant stakeholder of the partnership having a 20% interest. The appointers of the trust are Person 1 and Person 2 jointly. Person 1 is the sole shareholder and sole director of the trustee company. In the 20XX and 20XX income years there were no distributions issued. Person 1 received 100% of distributions in the 20XX and 20XX income years. Person 1 has operated the trust without Person 2's involvement and they solely manage all their financial affairs. Person 1 signed an undertaking of non-disclosure regarding investment decisions in 20XX that requires Person 2 to be at arms-length for all investment activities. Person 1 in their capacity as sole director and sole shareholder of the trustee company takes sole responsibility for the day-to-day management and operation of the trust. Person 2 does not control the trust either directly or in conjunction with Person 1, despite their role as a joint appointer. The Trust's asset is used by Person 1 in partnership for business purposes, that is to carry out the farming activities. The turnover of the Partnership was more than $2 million. At the time of sale, the maximum net asset value calculation for Person 1 and the trust were less than $6 million. For the 20XX financial year, the trustee resolved to distribute 99% of the income of the trust to Person 1 and 1% to Person 2. Therefore, Person 1 would be a significant individual as they have a small business participation percentage greater than 20%. As Person 2's small business participation percentage is greater than zero and Person 1 is a significant individual, they are both CGT concession stakeholders. At the end of the 20XX income year, Person 1 was XX years of age (born in MM 19XX) and Person 2 was XX years of age (born in MM 19XX). Based on Person 2 being under 55 years old, the trust will make the payment to a complying super fund on their behalf. The trust has kept a written record of the amount they choose to disregard and each stakeholder's percentage of the exempt amount. They will make the payments within seven days of making their choice to disregard the capital gain.

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 152-47 | Income Tax Assessment Act 1997 section 152-50 | Income Tax Assessment Act 1997 section 152-60 | Income Tax Assessment Act 1997 section 152-305 | Income Tax Assessment Act 1997 section 152-325 | Income Tax Assessment Act 1936 section 318 | Income Tax Assessment Act 1997 section 328-130(1)