Private ruling: CGT - permanently incapacitated
Date of advice: 20 December 2022
Published: 20 February 2023
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the taxpayer deemed to be permanently incapacitated for the purposes of subparagraph 152-110(1)(d)(ii) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: The taxpayer was born in 19XX. The taxpayer has been diagnosed with terminal cancer. In 20XX the taxpayer received a terminal illness payout from an insurance provider. The taxpayer is a significant individual of a related company that had a CGT event in the same income year as this ruling.

Relevant legislative provisions: Income Tax Assessment Act 1997 subparagraph 152-110(1)(d)(ii)

Reasons for decision: Summary: The term 'permanently incapacitated' is not defined for the purposes of the capital gains tax (CGT) provisions; however, the term has been used in relation to the retirement and superannuation provisions which provide some indication of its meaning for the purposes of the CGT 15-year exemption. The Australian Taxation Office outlines its view on permanent incapacitation on its website where it states, at QC 52288: "Whether an individual is permanently incapacitated at the time of the CGT event depends on the particular circumstances of each case. Based on the meaning of the term 'permanent incapacity' in retirement and superannuation law, an indicative description is: Ill health (whether physical or mental), where it is reasonable to consider that the person is unlikely, because of the ill health, to engage again in gainful employment for which the person is reasonably qualified by education, training or experience. The incapacity does not necessarily need to be permanent in the sense of everlasting." Therefore, the Commissioner considers that the taxpayer, a significant individual to a related company, is permanently incapacitated for the purposes of subparagraph 152-110(1)(d)(ii) of the ITAA 1997. This ruling only considers whether the taxpayer, as a significant individual of a related company, is permanently capacitated; this ruling does not consider other requirements of section 152-110 of the ITAA 1997.