Private ruling: Small business capital gains tax concessions
Published: July 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Is an amount disregarded under the retirement exemption then paid to you by the company included in your assessable income? | A1: No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You have held 50% of the shares issued in a company which commenced operation about X years ago. In the relevant year, the company sold a portion of the business and made a capital gain. The company intends to disregard a portion of the capital gain under the retirement exemption. The company will then make a payment to you. You are a significant individual in the company.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 152-D | Income Tax Assessment Act 1997 section 152-60 | Income Tax Assessment Act 1997 subsection 152-305(2) | Income Tax Assessment Act 1997 paragraph 152-310(2)(a) | Income Tax Assessment Act 1997 section 152-325

Reasons for decision: Summary: Subdivision 152-D of the ITAA 1997 contains the small business retirement exemption. You may choose to disregard all or part of a capital gain under the small business retirement exemption if you satisfy certain conditions. A company or trust, other than a public entity, can choose to disregard all or part of a capital gain where the conditions, contained in subsection 152-305(2) of the ITAA 1997, are met. One of these conditions requires the company to make a payment to a CGT concession stakeholder. Under paragraph 152-310(2)(a) of the ITAA 1997, any payment or part of one the company or trust makes to comply with section 152-325 of the ITAA 1997 is not assessable income, and is not exempt income, of the CGT concession stakeholder to whom it is made. | Detailed Reasoning - CGT concession stakeholder: Under section 152-60 of the ITAA 1997, an individual is a CGT concession stakeholder of a company or trust if they are a significant individual or the spouse of a significant individual where the spouse has a small business participation percentage in the company or trust at that time that is greater than zero. | Detailed Reasoning - Application to your circumstances: In your case, you are a significant individual of the company. Therefore, you are also a CGT concession stakeholder of the company. As per paragraph 152-310(2)(a) of the ITAA 1997, the payment you receive from the company is not included in your assessable income.