Private ruling: CGT - small business concessions
Date of advice: 20 September 2023
Published: 30 October 2023
Ruling period: Year ending 30 June 2021
Date scheme commenced: 1 June 2020

Ruling: Q1: Are you entitled to roll-over relief under Subdivision 124-C of the Income Tax Assessment Act 1997 (ITAA 1997) when you were issued with the Statutory Licence B as a replacement for the Statutory Licence A? | A1: Yes. The expiry of the Statutory License A was a CGT event C2. We accept that the Statutory License B was issued as a replacement for the expiry of the Statutory Licence A. Both Statutory Licence A and Statutory Licence B are statutory licenses issued under state law. Statutory Licence A authorises a substantially similar activity as that previously authorised by the Statutory Licence B. | Q2: Are you taken to have acquired Statutory Licence B at the time you acquired the Statutory Licence A for the purpose of applying the CGT discount gain in Subdivision 115-A in the ITAA 1997? | A2: Yes. As you acquired the Statutory Licence B as part of a Subdivision 124-C roll over, you are taken to have acquired it at the time you acquired Statutory Licence A for the purpose of section 115-25 of the ITAA 1997. | Q3: Did you satisfy the basic conditions in Subdivision 152-A of the ITAA 1997 to access the small business CGT concessions in relation to the capital gain from the sale of Statutory License B? | A3: Yes. All the basic conditions in Subdivision 152-A of the ITAA 1997 were satisfied. The sale of the Statutory Licence B was a CGT event A1, which resulted in a gain. You did not carry on a business in the income year other than a partner in a partnership that was a CGT small business entity. Statutory License was not an asset of the Partnership. The Partnership carried on its business in relation to the Statutory Licence B. Statutory Licence B was used by the Partnership for more than half your ownership period, satisfying the active asset test. | Q4: Will the Commissioner allow further time under paragraph 103-25(1)(b) of the ITAA 1997 for you to choose to apply the small business retirement exemption to the capital gain that arose from the sale of the Statutory Licence A in the 2020-21 income year? | A4: Yes. You did not consider the CGT small business concessions when lodging your 2020-21 income tax return and did not make a choice regarding the small business retirement exemption the capital gain from the sale of Statutory License B. The Commissioner will allow further time until 31 December 2023 for you to make the choice.

Relevant facts and circumstances: You and your spouse commenced a business in partnership (the Partnership) more than XX years ago. The business is made up of several similar activities. The Partnership commenced Activity M more than XX years ago using a general license issued to you. Shortly after Activity M was taken off the general license and was conducted by the Partnership under Statutory License A. Statutory License A was issued to you under state law by the relevant state authority. Statutory Licence A was renewable each year. An annual permit fee was paid by the Partnership for Statutory License A. On the expiry of Statutory Licence A, you were issued with Statutory License B under state law by the relevant state authority. Statutory License B was a transferable licence. You continued Activity M using Statutory License B. You sold Statutory License B with contract of sale entered late in the 2020-21 income year. Sale proceeds were received in the 2021-22 income year. You made a capital gain from the sale of Statutory License B. Your tax agent was not aware that the sale contract for Statutory License B had occurred in the 2020-21 income year. Consequently, the CGT event was not included in your tax return in that year. Throughout the period of your ownership, Statutory License A and Statutory Licence B were used by the Partnership in carrying on its business. You have been an Australian resident for tax purposes for the entire period of owning the Statutory Licence B and Statutory License B. The Partnership carried on a business in the 2019-20 income years and 2020-21 income years and had an aggregated turnover of less than $X million for both the 2019-20 and the 2020-21 income years. You did not carry on a business in the 2020-21 income year other than in partnership.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 124-A | Income Tax Assessment Act 1997 Subdivision 152-C | Income Tax Assessment Act 1997 Paragraph 103-25(1)(b)