Private ruling: Small business concessions
Date of advice: 5 April 2019
Published: May 2019
Ruling period: Year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Can you (the Company) apply the small business 15-year small business CGT exemption to disregard the capital gain you made on the disposal of your property? | A1: Yes.

Relevant facts and circumstances: The company acquired a factory. The owners of the company are discretionary trusts which are controlled by siblings. The beneficiaries are all currently over 55 years of age and will retire in connection with the sale of the factory. A connected entity has carried on a business at the factory. At all relevant times the income from the factory was below $2 million. The property has now been sold.

Relevant legislative provisions: Income Tax Assessment Act 1997 subdivision 152-A | Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-40 | Income Tax Assessment Act 1997 section 152-105 | Income Tax Assessment Act 1997 subsection 328-125(2)

Reasons for decision: Summary: Under section 152-110 of the Income Tax Assessment Act 1997 (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, an d (d) an individual who was a significant individual of the company just before the CGT event either: ● was 55 or over at that time and the event happens in connection with the individual’s retirement, or ● 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 occurred when the Company disposed of the property ● the event resulted in a gain ● as per the Commissioner’s view in TR 2019/1 the Company was carrying on a business and consequently it was a CGT small business entity, and ● the Company owned the property for more than 15 years and it was an active asset of the Company for a total of at least 7½ years of its ownership period. In addition, ● the Company continuously owned the property for the 15-year period ending just before the CGT event ● the Company has had a significant individual for a total of at least 15 years during which it has owned the property, and ● the Company’s significant individual just before it disposed of the property, was over 55 at that time and the disposal of the property occurred in connection with their retirement. Therefore, the Company qualifies 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.