Private ruling: Capital gains tax - Small Business Concessions - 15 year exemption
Date of advice: 20 December 2018
Published: April 2019
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Does Person B satisfy the basic conditions for relief under section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. Based on the information provided it is considered that you meet the basic conditions for relief including the conditions mentioned in subsection 152-10 (1A) of the ITAA 1997. The property satisfies the active asset test on the basis it (which have been owned either solely or jointly by you for more than 15 years) has been farmed by the Trust, a connected entity, for at least 7 ½ years. The Commissioner considers that the Trust was winding up the business in the 201X-1X income year and although the property was not used in the business of the Trust in the income year it was disposed of, section 152-49 of the ITAA 1997 applies to treat the asset as been used in the business at the time it was disposed of. | Q2: Can Person B claim the 15 year exemption under section 152-105 of the ITAA 1997 for any capital gain arising from the sale of property? | A2: Yes. You have owned the property jointly with your spouse for more than 15 years and you are over 55 years of age. In addition, the Commissioner considers that the sale of the properties is connection with your retirement; therefore you are eligible to apply the 15 year exemption.

Relevant facts and circumstances: A trust established by a Deed in the 1990s. The Trust is a discretionary trust. Trustees of the Trust are: ● Person A ● Person B. The beneficiaries of the Trust include Persons A and B and their family members. Persons A and B are both over 55 years of age. Persons A and B are married. Persons A and B jointly control the Trust and make all decisions in respect of the daily affairs and running of the Trust. Person A and B purchased the property after 20 September 1985. Persons A and B are joint owners of the property. Persons A and B have owned the property for more than 15 years. The Trust has used property to carrying on a business of primary production. Persons A and B were actively involved in all farming activities carried on by the Trust. Persons A and B and an unrelated third party entered into an agreement to sell the property. The agreement was signed during the income year of winding up the Trust. The property was sold for $X million of which Person B was entitled to 50% of the sale proceeds. A capital gain was made on the sale of the property. During an income year the Trust commenced winding up the primary production business. The sale of property was settled before the Trust was wound up. Persons A and B moved away from the property. Person B will retire and intends moving to the city with Person A after the sale of the property. Persons B had no intention or plan to recommence a business or enter into an employment arrangement. Person B does not carry on a business as a sole trader. Persons A and B are not partners in a partnership. Person B and the Trust are not connected or affiliates with any other entities which carry on a business. The aggregated business turnover for the Trust in the year of winding up was less than $2 million. The Trust’s distributable its income to Persons A and B during a number of income years.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 152-10 | Income Tax Assessment Act 1997 Subsection 152-10(1A) | Income Tax Assessment Act 1997 Paragraph 152-10(1)(b) | Income Tax Assessment Act 1997 Paragraph 152-10(1)(d) | Income Tax Assessment Act 1997 Section 152-35 | Income Tax Assessment Act 1997 Paragraph 152-35(1)(b) | Income Tax Assessment Act 1997 Subparagraph 152-40(1)(a)(ii) | Income Tax Assessment Act 1997 Section 152-49 | Income Tax Assessment Act 1997 Subparagraph 152-40(1)(a)(iii) | Income Tax Assessment Act 1997 Section 152-105 | Income Tax Assessment Act 1997 Paragraph 152-105(1)(b) | Income Tax Assessment Act 1997 Paragraph 152-105(1)(d) | Income Tax Assessment Act 1997 Subsection 328-115(1) | Income Tax Assessment Act 1997 Subsection 328-115(5)