Private ruling: CGT - property
Date of advice: 16 June 2023
Published: 7 August 2023
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you select which 2 hectares of the property qualifies for the partial main residence exemption in Subdivision 118-B of the Income Tax Assessment Act (ITAA 1997)? | A1: Yes. You can apply the main residence exemption in Subdivision 118-B of the ITAA 1997 to whichever area of land you choose in addition to the land on which your dwelling is situated. However, subsection 118-120(2) of the ITAA 1997 specifies that the total of the land (including the land on which the dwelling is situated) must not exceed 2 hectares. A capital gain or capital loss you make from the land is only disregarded under the main residence exemption if it is used primarily for private or domestic purposes in association with your dwelling. | Q2: Did you satisfy the basic conditions in Subdivision 152-A of the ITAA 1997 to be able to apply the small business capital gains tax (CGT) concessions to the disposal of the Property? | A2: Yes. Capital gains tax (CGT) event A1 happened when you disposed of the Property, and you made a capital gain on the disposal. Also, you met the maximum net asset value test just before the CGT event and the Property satisfied the active asset test. Further information about the small business CGT concessions can be found by searching for 'QC 22655' on www.ato.gov.au.

Relevant facts and circumstances: You acquired your share in the Property, which was vacant land at the time. The Property is more than 2 hectares. You owned the Property for more than 15 years and it was used in businesses carried on by connected entities for more than 7.5 years. A dwelling was built on the land after purchase and was used as your main residence until it was sold. You retained ownership of your previous main residence until it was sold. You made a choice under the absence rule in section 118-145 of the ITAA 1997 when this property was sold and claimed a full main residence exemption for this property. The net value of the CGT assets of yours, any entities connected with you, your affiliates or entities connected with your affiliates did not exceed $6 million just before the Property was sold. You disposed of your interest in the Property and made a capital gain.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 118-B | Income Tax Assessment Act 1997 section 118-120 | Income Tax Assessment Act 1997 Subdivision 152-A | Income Tax Assessment Act 1997 section 102-5