Private ruling: CGT - small business concession
Date of advice: 19 December 2023
Published: 12 February 2024
Ruling period: Year ending June 2023
Date scheme commenced: 1 July 2022

Ruling: Q1: Is the property an active asset in accordance with section 152-35 and 152-40 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. The property meets the active asset test under section 152-35 and 152-40 of the ITAA 1997 because the unit trust owned the property for more than 15 years and the asset was active the entire time. | Q2: Does the property qualify for the Capital Gains Tax (CGT) small business 15-year exemption in section 152-110 of the ITAA 1997? | A2: Yes. The unit trust is a small business entity for the income year. Person A is connected to the unit trust who owned the property for more than 15 years and it was used in business by another connected discretionary trust then by Person A from 2005 to 2023. The property was continuously owned for a 15-year period before the CGT event. Person A is over 55 years and has now retired as a result of the sale.

Relevant facts and circumstances: The unit trust purchased a rural property (the property). The sole director of the trustee company and 100% unit holder of the unit trust is Person A. The property was initially leased to a related discretionary trust for its primary production business. A residential house was also constructed upon the property and occupied by Person A and his family. In the 20XX financial year, the discretionary trust transferred the business assets of the primary production business to Person A in their capacity as sole trader carrying on a business. Person A continued to operate the business until they closed the business in conjunction with the sale of the property in June 20XX. As a result of this property sale, Person A has now retired (age over 55 years old). Person A has held more than 20% of the units trust since February 20XX. On 30 June 20XX, Person A's unit holding increased to 100%.

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 Subdivision 152-B | Income Tax Assessment Act 1997 section 152-110