A cabinet making business is operated in a company. The business has just been sold (FY26) and the capital gain is roughly $930k (before any
exemptions).
The shares in the company are owned by two family trusts. 50 shares each
They have owned the business for more than 15 years
The directors in the business are both trustees of their respective family discretionary trusts along with their spouses
One director is aged 54 (20.11.1970) and the other director is aged 56 (12.11.1968)
Application of Section 152-125 needs to be confirmed? Further for accounting entries this shall be treated as capital distributions and not accounting expense that is later treated as non deductible or non taxable in successive entities? Accordingly not to be part of distribution statement of trust . Is that correct?
Conditions of 15 years retirement exemption - :
Ownership Duration: The asset (i.e., the business) was owned continuously for at least 15 years before the CGT event.
→ Confirmed: Business owned for more than 15 years
Age Requirement: The individual claiming the exemption must be 55 years or older at the time of the CGT event and the event must be in connection with retirement.
→ One director is 56 (eligible), the other is 54 (not yet eligible unless retiring due to permanent incapacity).
Retirement Connection: The CGT event must occur in connection with retirement. This doesn’t require full cessation of work but must show a significant reduction in working hours or change in activities.
· Significant Individual Test: For a company or trust to claim the exemption, there must be a significant individual (someone with at least 20% interest) for at least 15 years of ownership.
→ Each trust owns 50% of shares, so each trustee likely meets this test if they’ve held their interest for the full period.
· CGT Concession Stakeholders means significant individual test
· A CGT concession stakeholder is:
An individual with at least 20% interest in the company or trust (direct or indirect).
In our case, each trustee-director likely qualifies as a CGT concession stakeholder through their trust’s 50% shareholding.
· Participation Percentage
This percentage determines how much of the $930,000 can be paid tax-free to each stakeholder.
For Companies:
- Participation percentage is based on shareholding.
- Each trust owns 50%, so each trust’s participation percentage is 50%.
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