Private ruling: CGT - Small business concessions
Published: May 2012
Ruling period: Year ended 30 June 2011 | Year ending 30 June 2012
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to the small business 15 year exemption? | A1:  | Q2: Are you entitled to the small business 50% active asset reduction? | A2:  | Q3: Are you entitled to the small business retirement exemption? | A3: 

Relevant facts and circumstances: You are over 55 years of age. You purchased a property in 1987. The property is a block of land with one dwelling and several sheds. The dwelling on the property was rented to an unrelated party from 1987 to 1998. Since 1998 you have used the dwelling as your personal residence. In 1991 you started a business as a sole trader. In 1994 a company was registered, and the business was conducted through this company. You are the sole director and shareholder of the company. Since you started your business in 1991, the business has used the sheds on the property to store plant, stock and equipment. Since you began to use the dwelling as your residence, you have also used the property to carry out all of the administrative functions of the business. The business turnover is less than $2million per annum. The property has never been used for any other income producing purpose. Your net asset value is less than $6million. You do not have any immediate plans for retirement.

Relevant legislative provisions: 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 Section 152-105 | Income Tax Assessment Act 1997 Subdivision 152-C | Income Tax Assessment Act 1997 Subsection 152-305(1) | Income Tax Assessment Act 1997 Subsection 328-125(2)

Reasons for decision: Summary: To qualify for the small business capital gains tax (CGT) concessions, you must satisfy several conditions that are common to all the concessions. These are called the 'basic conditions'. Each concession also has further requirements that you must satisfy for the concession to apply (except for the small business 50% active asset reduction which applies if the basic conditions are satisfied). The Advanced guide to capital gains tax concessions for small business 2010-11 (NAT 3359) provides a detailed explanation of the conditions for each concession. | Detailed Reasoning - Basic Conditions: In your case, it is accepted that you meet the basic conditions due to the following: · a CGT even will occur when you dispose of a portion of your property · the event will result in a gain · you have indicated that you are a small business entity, and · we consider that the asset meets the active asset test. The further requirements for each individual concession are discussed below. | Detailed Reasoning - Small business 15 year exemption: To be eligible for the small business 15-year exemption you must satisfy the basic conditions and two further conditions: · you continuously owned the CGT asset for the 15-year period ending just before the CGT event happened and · you are; o at least 55 years old at that time and the event happened in connection with their retirement or o permanently incapacitated at that time. From the information supplied, although you will be over 55 years of age at the time of the sale, you have no clear intention to retire. Accordingly, you are not entitled to the small business 15 year exemption. | Detailed Reasoning - Small business 50% active asset reduction: To apply the small business 50% active asset reduction, you only need to satisfy the basic conditions. There are no further requirements. As you satisfy the basic conditions, any capital gain from the sale of the property that remains after applying any current year capital losses, any unapplied prior year net capital losses, and the CGT discount (if applicable), is reduced by 50%.

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