Private ruling: Capital gains tax (CGT) exemption and small business concessions
Date of advice: 19 August 2019
Published: November 2019
Ruling period: Year ending ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is your 50% share of the property which was purchased prior to 20 September 1985 deemed to be a pre-CGT asset? | A1: Yes | Q2: Is the 50% share of the property you acquired after 20 September 1985 deemed to be a pre-CGT asset? | A2: No | Q3: Will the property qualify as an 'active asset', therefore allowing you to apply the small business 15-year exemption and disregard any capital gain? | A3: Yes

Relevant facts and circumstances: You and your spouse acquired a 10 hectare property prior to 20 September 1985 as joint owners. The property was your main residence. You and your spouse own a company of which your spouse is the sole director. The company is the corporate trustee of the family trust, which runs the property's primary production activities. From 19XX until 20XX the property was used to breed and sell livestock until the activities ceased in 20XX due to drought. You were both registered as primary producers with the relevant state authorities. As part of this registration, you were required to provide evidence regularly of your business activities. Based on financial advice that your spouse's share of the property should be transferred to you to better protect the family assets, the 50% share was transferred to you in 19XX. You are over 55 years of age and retired. The asset has been owned for over 15 years. The property was used as an active asset of the family trust for more than 7.5 years during the ownership period. The turnover of the trust has always been less than $2 million.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 152-B | Income Tax Assessment Act 1997 section 152-105 | Income Tax Assessment Act 1997 section 104 | Income Tax Assessment Act 1997 section 149-10

Reasons for decision: Summary: Section 149-10 of the I ncome Tax Assessment Act 1997 (ITAA 1997) provides that assets acquired before 20 September 1985 are pre-CGT assets. Capital gains or losses on pre-CGT disregarded. Assets acquired on or after 20 September 1985 are subject to the CGT provisions. As you acquired your share of the property prior to 20 September 1985 there is no CGT liability on your original share of the property. You acquired the second 50% share of the property when your spouse transferred their 50% ownership to you. The second 50% of the property is not a pre-CGT asset and is subject to the CGT provisions. However, any capital gain on the post-CGT share will be disregarded when you sell the asset as you satisfy the basic conditions in section 152-10 of the ITAA and the conditions in section 152-105 for the 15-year exemption for individuals.