Private ruling: Small business CGT concessions - 15-year exemption
Date of advice: 24 May 2016
Published: July 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2015

Ruling: Q1: Can you apply the small business 15-year exemption to disregard the capital gain you make on the disposal of your business premises? | A1: Yes.

Relevant facts and circumstances: You were incorporated more than 15 years ago. Your directors and shareholders are Person A and Person B. There has been no change to the company ownership structure since incorporation. You purchased the property more than 15 years ago. From the date of purchase the property has been used in your business. You intend on disposing of the property as soon as possible. You will consider renting out the property if you are unable to find a suitable buyer straight away. You satisfy the maximum net asset value test and will do so when the property is sold. Both Person A and Person B are at least 55 years old and do not have any plans to materially engage in business or employment after the property is sold.

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

Reasons for decision: Summary: The rules covering the small business 15-year exemption are contained in Subdivision 152-B of the Income Tax Assessment Act 1997 (ITAA 1997). If you qualify for the small business 15-year exemption you can entirely disregard the capital gain you make from the disposal of a capital gains tax (CGT) asset and do not need to apply any other concessions. In addition, you do not have to apply capital losses against your capital gain before applying the exemption. Under section 152-110 of the ITAA 1997 a company can disregard the capital gain made on the disposal of a CGT asset if the company: (a) satisfies the basic conditions for the small business CGT concessions in Subdivision 152-A of the ITAA 1997 for the gain (b) continuously owned the CGT asset for the 15-year period ending just before the CGT event (c) had a significant individual for a total of at least 15 years (even if it was not the same significant individual during the whole period) during which the company owned the CGT asset, and (d) an individual who was a significant individual of the company just before the CGT event either: (i) was 55 or over at that time and the event happens in connection with the individual's retirement, or (ii) was permanently incapacitated at that time. In your case, the basic conditions contained in Subdivision 152-A of the ITAA 1997 will be satisfied because: • a CGT event will occur when you dispose of the property • the event will result in a gain • you will satisfy the maximum net asset value test at the time of the event, and • you have owned the property for more than 15 years and it has been used in a business carried on by you for a total of at least 7½ years of your ownership period. In addition, • you will have continuously owned the property for the 15-year period ending just before the CGT event • you have had a significant individual for a total of at least 15 years during which you have owned the property, and • either Person A or Person B, who will be significant individuals of you just before you dispose of the property, will be over 55 at that time and the disposal of the property will happen in connection with one or both of their retirements. You qualify for the small business 15-year exemption in section 152-110 of the ITAA 1997 in relation to the property. You can disregard the capital gain you make on its disposal. | Detailed Reasoning - Additional information: Distributions of the exempt amount Section 152-125 of the ITAA 1997 provides that, if a capital gain made by a company is disregarded under the small business 15-year exemption, any distribution made by the company of that exempt amount to a CGT concession stakeholder is not included in the assessable income of the CGT concession stakeholder, and not deductible to the company, if the following conditions are satisfied: • the company makes a payment within two years after the CGT event that resulted in the capital gain or, in appropriate circumstances, such further time as allowed by the Commissioner • the payment is made to an individual who was a CGT concession stakeholder of the company just before the CGT event, and • the total payments made to each CGT concession stakeholder does not exceed an amount determined by multiplying the CGT concession stakeholder's control percentage by the exempt amount.