Private ruling: Connection to retirement - 15 year exemption for small businesses
Date of advice: 27 June 2017
Published: October 2017
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the disposal of the business considered to be in connection with the retirement of the significant individual of the company for the purposes of the small business 15 year exemption from capital gains tax? | A1: Yes. Having considered your circumstances and the relevant factors the Commissioner has determined that the disposal of the business will be in connection to the significant individual’s retirement under sections 152-110 and 152-55 of the ITAA 1997 with regards to the 15 year exemption under the capital gains tax small business concession. Further information on the 15 year exemption can be found on our website ato.gov.au and entering Quick Code QC 48078.

Relevant facts and circumstances: Company A is selling its business which it has held for over 15 years. The sole shareholder of Company A is Company B. Company B has had a significant individual for over 15 years. The significant individual is over 55 years old. The purchasers of the business can only afford to purchase 50% of the business at this time. They are not willing to purchase shares in the existing company and would prefer to trade through a new entity. As a result, Company A will sell the business to a unit trust. The purchasers of the business will own 50% of the business through the unit trust and the significant individual will own 50% of the business. The significant individual wishes to retire. However, the purchasers of the business would like the individual to retain some ownership and remain as a director to assist them in the management of the business and provide training and advice on a part time basis. The significant individual currently works 5 days a week. Once the sale is processed their working days will be reduced to 1 or 2 days and occasionally 3 days a week. The hours worked per day will also be reduced. The significant individual plans to sell their share of the business as soon as possible. They intend to sell it to the existing purchasers as soon as they are able to afford it. They plan to fully retire after that.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 152-110 | Income Tax Assessment Act 1997 Section 152-55 Further issues for you to consider | This ruling has not fully considered your eligibility for the CGT small business concessions; it has only addressed eligibility under the specified provisions of the ITAA 1997. You should ensure that you satisfy all the basic conditions and other relevant conditions for the eligibility. More information is available in the publication Advanced guide to capital gains tax concessions for small business 2014-15 , which is available on our website ato.gov.au.