Private ruling: CGT - 15 year exemption
Date of advice: 8 September 2022
Published: November 2022
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the payment of part of the pre-capital gains tax (CGT) capital gain by the company to individual A be exempt under section 152-125 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes, in this case the company satisfies subsection 152-125(1) of the ITAA 1997 as the company would have been able disregard the capital gain made from the disposal of the property under 152-110(1) of the ITAA 1997, except that the capital gain was disregarded anyway because the property was acquired before 20 September 1985. Further the company intends to make a payment within 2 years of the CGT event to a CGT concession stakeholder of the company, individual A. Provided the payment does not exceed the stakeholder's participation percentage multiplied by the exempt amount, as per subsection 152-125(2) of the ITAA 1997, it will not be a dividend or frankable distribution to individual A. This private ruling applies for the following periods: Year ended 30 June 20XX Year ended 30 June 20XX

Relevant facts and circumstances: In 20XX the company sold primary production land. The property was acquired before 20 September 1985. The company has made a capital gain of approximately $X. All of the ordinary shares in the company are pre capital gains tax shares other than the X shares which were inherited by individual A. At no time since 19 September 1985 has it been the case that there has been a deemed re-acquisition of land under Division 149 of the ITAA 1997. Prior to the sale of the property, individual A and their spouse operated a business on the property through a partnership. Individual A is the sole director of the company. The company is a small business entity with a turnover of less than $X million. The property passes the active asset test. Individual A is above 55 years of age and intends to retire. The company will make a payment to individual A within 2 years of the sale. Individual A is a CGT concession stakeholder in the company.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 152-110 | Income Tax Assessment Act 1997 section 152-125 | Income Tax Assessment Act 1997 subsection 152-125(1) | Income Tax Assessment Act 1997 subsection 152-125(2)