Private ruling: Compulsory acquisition and small business concessions
Date of advice: 17 July 2019
Published: September 2019
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you apply the small business 50% active asset reduction and the retirement exemption under Subdivision 152-C and D of the Income Tax Assessment Act 1997 (ITAA 1997) , to the capital gain made from granting the easement? | A1: Yes. In accordance with Taxation Ruling TR 97/3, the compulsory acquisition of the easement is treated as a partial disposal of the land and will result in a capital gain. You satisfy the basic conditions for relief under Subdivision 152-A of the ITAA 1997 in relation to this gain: you are a CGT small business entity and the property was actively used by you in carrying on a business for your entire ownership period. Accordingly, you can apply the small business 50% active asset reduction. You may also apply the retirement exemption (up to your $500,000 lifetime limit) if you make the relevant choice in writing. Further information can be found by searching QC52290 on ato.gov.au .

Relevant facts and circumstances: You inherited the land in 19XX. You are a small business entity and the land has been actively used in carrying on a business since you inherited it. The aggregated turnover for the business is less than $X million. In 20XX you exchanged a contract with a non-government entity granting an easement over the land. The non-government entity had the power to compulsorily acquire the easement if negotiations failed. You incurred a capital gain from this transaction and this is not in connection with your retirement. You are over 55 years of age.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 124-70 | Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-205 | Income Tax Assessment Act 1997 section 152-305