Private ruling: Small business CGT concessions
Date of advice: 17 April 2018
Published: July 2018
Ruling period: Financial year ending 30 June 2018 | Financial year ending 30 June 2019
Date scheme commenced: 1 July 2017

Ruling: Q1: Do you satisfy the basic conditions for small business relief contained in Division 152 of the Income Tax Assessment Act 1997 (ITAA 97)? | A1: Yes. The sale of your shares in the business will be an A1 CGT event and will result in a gain. You satisfy the maximum net asset value test as the total net value of the CGT assets owned by you, your affiliates and any entities connected with you and your affiliates is less than $6,000,000. You are a concessional CGT stakeholder as you have a direct participation percentage of 50%, and the shares are active assets as they pass the 80% test. You meet the basic eligibility for the small business CGT concessions. | Q2: Will the sale of your shares in the business to a new holding company enable you to access the 15 year small business CGT concession in Subdivision 152-B of the ITAA 97? | A2: Yes. You have owned the CGT asset for XX years and have been a significant individual of the company that whole time. You meet the basic conditions for the small business concessions. You will be over 55 at the time of the sale. The sale of the business is part of the succession planning leading to your retirement. There has already been a reduction in working hours and there will be further significant reductions when you sell the property as part of the retirement plan. You meet the requirement for the 15 year exemption.

Relevant facts and circumstances: You and your partner commenced business in the early 1990s, trading as a partnership. You incorporated a year later, continuing retail trading in the carpet industry. The company is an Australian resident. You and your partner each own a 50% share in the business and there has never been a change in ownership. You and your partner are over the age of 55. The market value of the shares in the business is $X. Each of your share interest is calculated at $X market value. The value of you and your partners other assets is under $X. You have no affiliates, except for each other. Neither of you control another partnership, company or trust. You and your partner have Division 7A loans from the company. The shares in the business will be sold to a new holding company. The holding company will be owned by a new discretionary trust. You and your partner have reduced your hours of work already and will continue to significantly reduce them as part of your retirement plan, which the sale of the shares relates to.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 152-10 | Income Tax Assessment Act 1997 Subsection 152-10(2)(a) | Income Tax Assessment Act 1997 Section 152-105 | Income Tax Assessment Act 1997 Section 152-15 | Income Tax Assessment Act 1997 Section 152-35 | Income Tax Assessment Act 1997 Subsection 152-40(3) | Income Tax Assessment Act 1997 Subsection 152-40(3A) | Income Tax Assessment Act 1997 Section 152-55 | Income Tax Assessment Act 1997 Section 152-60