Private ruling: CGT - small business concessions
Date of advice: 27 May 2022
Published: August 2022
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the property interest comprising Property 1 be treated as a separate Capital Gains Tax (CGT) asset for the purpose of applying Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. Section 108-5(2) of the ITAA 1997 states an interest in an asset can be a separate CGT asset. TD 2000/31 states the view of the Commissioner is that they remain separate assets for CGT purposes and that, on disposal, each interest has a separate date of acquisition, cost base and capital proceeds. | Q2: Will Property 1 meet the active asset test under section 152-35 of the ITAA 1997? | A2: Yes. As you continuously owned the CGT asset for the 15-year period ending just before the CGT event and it has been used as the head office in your wholesale business for at least 7.5 years, it has met the active asset test as outlined in ITAA 152-35 and s152-10(1)(d). It is therefore not necessary to consider any subsequent use. | Q3: Will Property 1 meet the condition in 152-105(b) of the ITAA 1997? | A3: Yes. You acquired the property in 19XX and have continuously owned the CGT asset for greater than the required 15-year period ending just before the CGT event. The amalgamation of the titles of Property 1 and Property 2 does not change the ownership period of Property 1 for CGT purposes. | Q4: Will the in-specie contribution of the Property be excluded from being a non-concessional contribution under subparagraph 292-90(2)(c)(iii) of the ITAA 1997 to the extent it relates to Property 1? | A4: Yes. As you qualify for the small business 15 year exemption, the capital gain can be entirely disregarded. Accordingly, if you make an in-specie contribution of the property to your fund in connection with your retirement, you will be eligible to choose to exclude some or all of the contribution from being a non-concessional contribution, up to your CGT cap. The choice will only be valid if it is: (a) made in the approved form; and (b) given to the superannuation fund on or before the time the contribution is made. With regard to the in-specie contribution, the legislation does not prevent the CGT event, choice and contribution of the 15 year exempt amount from happening simultaneously.

Relevant facts and circumstances: You own a commercial property which is leased to 2 separate entities. Property 1 was purchased first and commercial premises were constructed. From the following year it was used by you and your then spouse for your business purpose. The business was later transferred to a company in which you were the majority shareholder for several years. Property 2 was later purchased and has been leased to an unrelated entity the entire period and does not form part of this ruling. The 2 titles were later amalgamated into a single title. Property 1 comprises approximately XX% of the property in its entirety. You have a complying Self-Managed Superannuation Fund (SMSF). As part of your retirement plans you are considering transferring the property to your SMSF as an in-specie contribution. You are a director of the trustee and one of two members of the fund. It has been determined that you meet the maximum net asset value test and the transfer is in connection with your retirement. You are over 60 years old and have not previously used any part of your lifetime Capital Gains Tax (CGT) cap.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 108-5(2) | Income Tax Assessment Act 1997 Subdivision 152 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-40 | Income Tax Assessment Act 1997 section 285-5 | Income Tax Assessment Act 1997 section 292-90 | Income Tax Assessment Act 1997 section 292-100