Private ruling: Capital gains tax concessions - basic conditions - rollover relief
Date of advice: 29 July 2020
Published: August 2020
Ruling period: Period Ending 30 June 2021
Date scheme commenced: 1 July 2020

Ruling: Q1: Are the basic conditions in section 152-10 of the Income Tax Assessment Act 1997 satisfied in relation to the capital gains from the sale of your shares in the Company? | A1: Yes. You satisfy the maximum net asset value test and you are a CGT concession stakeholder. The shares in the Company are regarded as an active asset because the Company has active assets and inherently connected cash with a market value of at least 80% of the market value of all its assets. Therefore, provided the sale of shares happens in the 20XX income year the Commissioner is satisfied the basic conditions have been met. | Q2: Are you entitled to the small business rollover relief under subdivision 152-E of the Income Tax Assessment Act 1997 ? | A2: Yes. The Company satisfies the basic conditions for small business CGT concessions and therefore you can choose to obtain the small business rollover relief under subdivision 152-E of the Income Tax Assessment Act 1997 . Further CGT events will happen if the conditions of this subdivision are not met by the end of the replacement asset period.

Relevant facts and circumstances: You started the Company in 20xx. You are the sole shareholder of the Company. The Company has had sustained growth and profits from the 20xx income year. You propose to sell your shares in the Company to a family trust for the market value in the 20XX income year. You have advised us you satisfy the maximum net asset value test of $6 million. You have provided the cash in the Company's bank account is working capital used for unexpected events, purchasing equipment, hiring staff and performing medical procedures. Approximately $xxx,xxx is cashflow used to meet ongoing wages, rent and business overheads for a period of time in the event that business income is impacted by the current COVID-19 pandemic. Medical equipment is likely to be replaced by 31 December 20xx and is estimated to cost approximately $xxx,xxx to $xxx,xxx including GST. Further medical equipment is planned to be purchased in approximately 12-18 months' time and will cost approximately $xxx,xxx including GST. The accumulation of cash at bank has resulted from recent business profitability, not from loans from related parties into the business. The Company has not recorded any loans payable since 20xx.

Relevant legislative provisions: Section 152-10 of the Income Tax Assessment Act 1997 | Section 152-35 of the Income Tax Assessment Act 1997 | Section 152-40 of the Income Tax Assessment Act 1997 | Subdivision 152-E of the Income Tax Assessment Act 1997