CGT 15-Year Exemption

James Murphy Tax

Hi, this is a CGT query and whether the respective “partners” are entitled to use the small business 15-year CGT exemption and/or contribute the assessable gain into their respective super funds to gain CGT exemption.

The respective “partners”, say A & B via partner A’s family trust and B via his private company, each hold 50% of the units in a trading unit trust.

The unit trust operates a stock and real estate agent business and personally utilises sale yards owned by A & B (leasehold property in the ACT).

The rates and taxes relating to the sale yards are paid for by the Unit Trust agency business.

The leasehold property that A & B has “owned” for over 15 years was recently sold to another party for different purposes. So not as a going concern. GST has been charged on the transaction.

The net “gain” on the sale is around $680,000… i.e., $340k each before discount.

I’m assuming that A’s net assets, including the share of the Unit Trust and his family trust, would have to be less than $6m. B’s share of the Unit Trust and his family company would also have to be less than $6m for each of them to qualify for the small business test and associated CGT exemption…although if one fails the test…this won’t impact the other?


We will confine ourselves to general comments with the strong recommendation you get a legal opinion.

First, the active asset test has to be met – In this case, the sales yard was used exclusively by this business for at least 7.5 years, which is a requirement.

If it derived rental income from third parties, then that is an issue.

To establish they were affiliates – you should be able to establish A and B (or immediate family members) were both “significant individuals” of the relevant discretionary trust at the time of sale.

Finally, we confirm the $6 million tests must be met as outlined. If the business turned over less than $2 million per annum, then the $6 million net asset test does not need to be met.

Given we are dealing with a unit trust, CGT event 4 must be considered. In cases such as this, the CGT Small Business Retirement Concession may overcome this.