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When does the 15 year exemption apply to capital gains tax?

My wife and I operate a farm through a family trust and have done for the last 20 years. In 2012 we made a loss on the farm and this year we want to retire and sell the farm to make a $1.5 million capital gain. We also made a tax loss this year. We haven't made any income distributions for this year but all previous years when we made a profit we distributed it to either my wife or I. Can we get the 15 year exemption?
Asked in Newcastle - Newcastle and Lake Macquarie, NSW, 06-12-2015
1 Lawyer Answered
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  1. Trusts
Lawyer Answers (1): Answers from lawyers are general preliminary responses. They are not formal legal advice and cannot taken account of all your circumstances. They do not create a lawyer–client relationship.

Answer by LegalEagle™ staff, Melbourne 3000 VIC

  • Yes. When a business is operated through a trust the individuals will pass what is called the 'significant individual test' if they receive 20% of the income or capital in the year the gain is made.
  • You and your wife have received at least 20% of the income for all of the 15 years that distributions were made. You therefore have the benefit of the 15 year exemption and won't pay tax.

 

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