Private ruling: Small business CGT concessions 15 year exemption
Published: November 2011
Ruling period: 1 July 2011 to 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: For the purposes of satisfying the conditions for contributing a capital gain to superannuation under section 292-100 of the Income Tax Assessment Act 1997 (ITAA 1997), would the small business 15-year exemption in section 152-105 of the ITAA 1997 apply to allow your client to disregard any capital gain from the sale of a property in August 2007? Advice/Answers: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 292-25. | Income Tax Assessment Act 1997 Section 292-80. | Income Tax Assessment Act 1997 Subsection 292-85(1). | Income Tax Assessment Act 1997 Subsection 292-85(2). | Income Tax Assessment Act 1997 Section 292-90. | Income Tax Assessment Act 1997 Subsection 292-90(2). | Income Tax Assessment Act 1997 Paragraph 292-90(2)(c). | Income Tax Assessment Act 1997 Section 292-100. | Income Tax Assessment Act 1997 Subsection 292-100(1). | Income Tax Assessment Act 1997 Subsection 292-100(2). | Income Tax Assessment Act 1997 Subsection 292-100(4). | Income Tax Assessment Act 1997 Subsection 292-100(5). | Income Tax Assessment Act 1997 Subsection 292-100(7). | Income Tax Assessment Act 1997 Subsection 292-100(8). | Income Tax Assessment Act 1997 Subsection 292-100(9). | Income Tax Assessment Act 1997 Section 292-105 | Income Tax Assessment Act 1997 Section 102-20. | Income Tax Assessment Act 1997 Subsection 104-10(5). | Income Tax Assessment Act 1997 Section 100-45. | Income Tax Assessment Act 1997 Section 152-105.

Reasons for decision: Summary: Your client will be eligible to make a superannuation contribution of up to $X million from the capital gain made from the sale of their farming property under the CGT cap as they are eligible for the small business 15 year exemption. | Detailed Reasoning - Detailed reasoning: A capital gain or capital loss is made when a CGT event happens to a CGT asset you own under section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997). However, there is generally an exception for pre-CGT assets; that is, those acquired prior to 20 September 1985, under paragraph 104-10(5)(a) of the ITAA 1997. In order to meet the conditions for contributing a capital gain to superannuation under subsections 292-100(2), 292-100(3), 292-100(5) and 292-100(6) of the ITAA 1997, contribution of capital proceeds arising from the 15 year-exemption that are allowed under the CGT cap, can include capital proceeds that would have qualified for the exemption but for: (a) the CGT event resulting in no capital gain or loss under the rule in s100-45 (that is, where the gain is calculated by reference to indexation and the capital proceeds are greater than the cost base but less than the indexed cost base) (b) the asset being a pre-CGT asset (that is, gains on pre-CGT assets), or (c) the asset being disposed of before the 15-year holding period had elapsed because of permanent incapacity of the person which occurred after the asset was acquired. In other words, capital proceeds that can be contributed under the CGT cap limit can include these capital proceeds. A contribution will only count towards the CGT cap if the individual makes the choice in the approved form and gives it to their superannuation fund before, or when, the contribution is made section 292-100(9) of the ITAA 1997. The contribution must be made no later than the day on which the individual is required to lodge their tax return for the income year in which the CGT event occurred or 30 days after the day the individual received the capital proceeds, whichever is the later (section 292-100(2) of the ITAA 1997). Therefore, section 292-100 allows you to treat the asset as a post CGT asset. You then determine the amount you would disregard under the small business 15-year exemption or small business retirement exemption. | Detailed Reasoning - Small Business 15 year exemption: Subdivision 152-B of the ITAA 1997 states that the capital gain made on the sale of an asset can be entirely disregarded if you qualify for the small business 15-year exemption. Further, you do not need to apply any other concessions, and capital losses are not applied before the 15-year exemption. Section 152-105 of the ITAA 1997 outlines the conditions an individual must satisfy to be eligible for the 15-year exemption. They are as follows: a) You must satisfy the basic conditions for the small business CGT concessions in Subdivision 152-A of the ITAA 1997 b) You continuously owned the CGT asset for the 15 year period ending just before the CGT event c) if the CGT asset is a share in a company or an interest in a trust, the asset must have had a significant individual for a total of at least 15 years during which you owned the CGT asset, and d) either: i) you are 55 or over at the time of the CGT event and the event happens in connection with your retirement; or ii) you are permanently incapacitated at the time of the CGT event. The conditions will now be applied to your client's facts to determine your eligibility for the exemption. a) Your client satisfies the basic conditions for the small business CGT concessions. b) Your client has held the asset for well over the 15 years. c) The CGT asset was a property held in partnership by your client and her spouse. This condition does not apply to your client. d) Your client will be over 55 years of age when the CGT event occurred. Your client intends to contribute the some of the proceeds from the sale of their property to their superannuation. Your client satisfies the criteria set out in section 152-105 of ITAA 1997 and they are eligible for the small business 15 year exemption. Your client will be eligible to make a superannuation contribution of up to $X million from the capital gain made from the sale of his farming property under the CGT cap under section 292-100 of the ITAA 1997. | Detailed Reasoning - Further issues for you to consider:: Provided the contribution is made in accordance with the above ruling, the contribution will not be included as concessional or non-concessional contributions for the 2011-12 income year.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: Your client purchased a property in 19XX. From date of purchase until some years later your client leased the property to a third party. From then until the property changed hands in the 2011-12 income year the property was an asset used in your client's primary production business. | Your client entered into a contract for the sale of the property. The proceeds were paid over several years and the final payment will be made in the 2011-12 income year. | The capital proceeds from the sale of the property would have qualified for the small business capital gains tax (CGT) concessions (specifically the 15 year exemption) apart from the fact that there is no taxable capital gain as the asset was a pre-CGT asset. | From the final payment your client would like to contribute up to $X million into their superannuation fund. | In the 2011-12 income year your client will be aged between 65 and 74 years of age. | Your client will meet the work test requirements for contributing to superannuation as she will have worked at least 40 hours in a 30 day period in the 2011-12 income year. | There is no taxable capital gain as the asset was a pre CGT asset. | Your client will notify their superannuation fund prior to or when making the contribution that he wants the amount to count towards the Small Business CGT cap. | The contribution will be made to the superannuation fund within 30 days of your client receiving the final instalment of the capital proceeds.