Private ruling: Small business capital gains tax concessions
Date of advice: 24 June 2020
Published: August 2020
Ruling period: Year ending 30 June 2020
Date scheme commenced: 1 July 2019

Ruling: Q1: Do you and your spouse satisfy the basic conditions to apply the CGT small business concession on the sale of the property? | A1: Yes. You and your spouse satisfy the basic conditions for the following reasons. A CGT event happened in relation to a CGT asset that resulted in a gain. Additionally, the maximum net asset value is less than $6 million. You and your spouse also satisfy the conditions of the active asset test as the property has been used by an entity connected with you and your spouse. Further information on the basic conditions can be found by searching 'QC 52289' on ato.gov.au | Q2: Can you and your spouse reduce the capital gain made on the disposal of the property by applying the small business retirement exemption? | A2: Yes. In this case you and your spouse are under 55 and satisfy the basic conditions. You are eligible to reduce your gain by applying the small business retirement exemption up to your lifetime limit of $500,000. As you are under 55 years old you must make a personal contribution equal to the exempt amount into a complying superannuation fund or retirement savings account, you must also keep a record of the amount you choose to disregard. Further information can be found by searching 'QC 52290' on ato.gov.au

Relevant facts and circumstances: You and your spouse are both residents for tax purposes. You are both under 55 years of age. You and your spouse sold a jointly owned investment property that resulted in a gain. The property was leased to related entity. The related entity used the property to carry out day to day operations in the office and storage in the warehouse. You are the managing director of entity and you don't carry on a business in your own right. Your spouse is an employee of the entity and has a business. The aggregated annual turnover of the connected entities over the recent financial years is in excess of $2 million. The net value of the assets within the group is less than $6 million. You and your spouse have previously utilised the retirement exemption.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 section 152-40 | Income Tax Assessment Act 1997 subsection 328-125(2) | Income Tax Assessment Act 1997 subsection 328-125(4) | Income Tax Assessment Act 1997 subsection 152-35(1) | Income Tax Assessment Act 1997 subsection 152-40(4) | Income Tax Assessment Act 1997 Subdivision 152-D | Income Tax Assessment Act 1997 subsection 152-305(2) | Income Tax Assessment Act 1997 section 152-55 | Income Tax Assessment Act 1997 section 152-70 | Income Tax Assessment Act 1997 section 152-60 | Income Tax Assessment Act 1997 section 152-320