Private ruling: CGT – SBC – retirement exemption
Date of advice: 12 March 2018
Published: June 2018
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the Trust eligible to apply the small business retirement exemption to the capital gain made on the disposal of a property)? | A1: Yes The rules covering the small business retirement exemption are contained in Subdivision 152-D of the Income Tax Assessment Act 1997 (ITAA 1997). A Trust or company may choose to disregard all or part of a capital gain under the retirement exemption if certain conditions are satisfied under subsection 152-305(2) of the ITAA 1997. In this case, the Trust satisfies the basic conditions as contained in Subdivision 152-A of the ITAA 1997. The significant individual test is also satisfied as Person B is a significant individual of the Trust just before the CGT event. In addition, the Trust will keep a written record of the amount it will choose to disregard (the CGT exempt amount) and will make a payment of the exempt amount to Person B within seven days of receiving the proceeds. As Person B is over 55 years of age, there is no requirement for a payment to be made to a complying superannuation fund. Further the exempt amount does not exceed Person B’s the lifetime CGT retirement exemption limit. As the Trust satisfies the conditions under Subdivision 152-D of the ITAA 1997, the Trust is entitled to apply the small business retirement exemption to the gain made on the sale of the property.

Relevant facts and circumstances: The Trust was created a number of years ago. The Trust is a discretionary Trust. A company was appointed Trustee of the Trust. The directors and shareholders of the company are: ● Person A ● Person B Distributions of income from the Trust have always been distributed to Persons A and B. Persons A and B have had 100% control over the day to day running of the trust and the company. Person B is over 55 year old. The Trust purchased the property a number of years ago. The company has used the property for farming. The company is an affiliate of the Trust and both Persons A and B are significant individuals of the Trust. The Trust sold the property. The Trust received the capital proceeds from the sale of the property. The sale of the property will result in a capital gain made by the Trust. The net capital gain made by the Trust from the sale of the property will be distributed to the beneficiary B. The Trust will document and make a payment to Person B equal to the CGT exempt amount within seven days of settlement of the sale of the property. Person B has not used any of their CGT retirement exemption limit. The exempt amount as a result of the gain for the sale of the property is less than Person B’s CGT retirement exemption limit. The Trust will keep a written record of the amount the Trust chooses to disregard under the small business retirement exemption.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 152-50 | Income Tax Assessment Act 1997 Section 152-60 | Income Tax Assessment Act 1997 Subdivision 152-A | Income Tax Assessment Act 1997 Section 152-110 | Income Tax Assessment Act 1997 Subdivision 152-D | Income Tax Assessment Act 1997 Section 152-305 | Income Tax Assessment Act 1997 Section 152-310 | Income Tax Assessment Act 1997 Subsection 152-310(1) | Income Tax Assessment Act 1997 Subsection 152-310(2) | Income Tax Assessment Act 1997 Section 152-315 | Income Tax Assessment Act 1997 Section 152-320 | Income Tax Assessment Act 1997 Section 152-325