Private ruling: Small business concessions
Date of advice: 14 January 2019
Published: May 2019
Ruling period: Year ending 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Do you satisfy the basic conditions for the small business capital gains tax (CGT) concessions on the sale of the property? | A1: Yes You satisfy the basic conditions as the aggregated turnover of your business was less than $2 million in the previous financial year. You satisfy the conditions of the active asset test as you have used the asset for at least 7.5 years in the course of carrying on a business and the exceptions do not apply. Further information can be found by searching 'QC 44192' on ato.gov.au | Q2: Can you disregard the capital gain made on the disposal of the property under the small business 15 year exemption? | A2: Yes. You won’t have an assessable gain on the sale of the active asset as you have met the basic conditions, are over 55 years old and you have owned the active asset for more than 15 years. The Commissioner also considers that the CGT event has happened in connection with your retirement. Further information can be found by searching 'QC 52288' on ato.gov.au

Relevant facts and circumstances: The company acquired the property prior to the introduction of capital gains tax on 19 September 1985. The property has been continuously owned by the company since acquisition. The property has been used by the company to operate a business for more than 15 years. The property has not been used for any other purpose throughout the ownership period. After 20 September 1985, the majority of ordinary company shares were transferred to Individual A, which resulted in the underlying majority interest in the property being transferred. This resulted in the property becoming a post-CGT asset. The cost base of the property is based on the market value of the property at the time of transfer. There are currently ordinary shares in the company, which are owned by: ● Individual A: X ordinary shares, beneficially owned; and ● Individual B: Y ordinary shares, beneficially owned. Individual A has continuously owned majority interest since the date of transfer. The company granted options to another company on in the year ending 30 June 2019 to purchase the property for a set price. These options must be exercised in the year ending 30 June 2020 or 10 days before the next Federal election, whichever occurs first. A capital gain will be realised upon the exercise of the option agreement. The aggregated turnover of the company was less than $2,000,000 for the previous financial year. This amount includes the aggregated turnover amount of any entities affiliated with the company. Individual A is currently the sole director of the company and is transitioning into retirement in the year ending 30 June 2019. Upon Individual A’s retirement, their general management duties of the company will be handed to the current Chief Financial Officer. The company will also appoint a new director. This will commence in the year beginning 1 July 2019.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 152-A | Income Tax Assessment Act 1997 Subdivision 152-B