Private ruling: Small business - 15 year exemption
Date of advice: 5 July 2023
Published: 21 August 2023
Ruling period: Year ending 30 June 2024
Date scheme commenced: 1 July 2023

Ruling: Q1: Will the small business 15-year exemption in Subdivision 152-B of the Income Tax Assessment Act 1997 (ITAA 1997) apply in relation to the disposal of the property to allow you to disregard any capital gain from a CGT event that happened in connection with the retirement of a significant individual? | A1: Yes, the requirements to allow you to apply the small business 15-year exemption to the sale of the property are satisfied. You satisfy the basic conditions for small business relief in respect to the proposed sale. You have owned the property for more than 15 years and had a significant individual for at least 15 years who was at least 55 years at the time the proposed CGT event happened. The proposed sale resulting in disposal of the property is to happen in connection with a significant individual's retirement. In this case, Person A is a significant individual who is over 55 years of age at the time of the proposed CGT event, and the sale of the property is in connection with their retirement. As such, you satisfy the conditions under section 152-110 of the ITAA 1997 to apply the small business 15-year exemption to the sale of the property.

Relevant facts and circumstances: You acquired a property approximately 20 years ago, which has been utilised continuously for primary production purposes since acquisition. Negotiations have commenced for the sale of the property. You satisfy the basic conditions as you are carrying on a business and have an aggregated turnover of less than $2 million and the asset has been used in your business for over 7.5 years. Person A is over 55 years of age and receives 50% income of the trust. Person A has been actively involved in running farm operations to date, including all administrative matters, and helping with all aspects of farm operations. When the land sells, the farm operations will cease on the land and Person A will no longer work and will retire.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 152-B | Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-110