Private ruling: Small business capital gains tax concessions - 15-year exemption
Published: March 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Will you be eligible to disregard any capital gain made on disposal/transfer of the property under the CGT 15-year exemption concession for small business? | A1: Yes

Relevant facts and circumstances: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: • Your private ruling application. • Record of a telephone conversation with your agent. You hold 50% of farm land which you purchased prior to 1990. You have continuously operated a business on the land since acquisition. The relative that owns the other half of the land operates a separate business on the land. The land has not been used for any other purpose. You have ceased your business. You are now only engaged in small amounts of casual employment. You are over 55 years of age. You are not selling the land but you are considering transferring your ownership to a Family Trust as part of a transition towards your retirement. The turnover for the business was under $2 million.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 152-10 | Income Tax Assessment Act 1997 paragraph 152-105

Reasons for decision: Summary: Section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997) contains the basic conditions you must satisfy to be eligible for the small business CGT concessions. These conditions are: • a CGT event happens in relation to a CGT asset of yours in an income year; • the event would have resulted in the gain; • you satisfy the maximum net asset value test; and • the CGT asset satisfies the active asset test. The small business 15-year exemption takes priority over the other small business concessions and the CGT discount. If the small business 15-year exemption applies, you entirely disregard the capital gain so there is no need to apply any further concessions. Further, you do not reduce the capital gain by any capital losses before you apply the 15-year exemption concession. Subsection 152-105 of the ITAA 1997 provides that an individual can entirely disregard any capital gain if all of the following conditions are satisfied: (a) you satisfy the basic conditions (b) you continuously owned the CGT asset for the 15-year period ending just before the CGT event (c) you are either: i. 55 or over at the time of the CGT event and the event happens in connection with your retirement; or ii. permanently incapacitated at the time of the CGT event. In your case: • you satisfy the basic conditions • you have owned your share of the asset for over 15 years • you are aged over 55 • you are proposing to transfer the land in connection with your retirement Accordingly, you satisfy all the conditions necessary to be eligible for the small business 15-year exemption concession in relation to your share of the property.