Private ruling: CGT - small business concessions
Date of advice: 13 May 2026
Published: 27 July 2026
Ruling period: 1 July 20xx - 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Will Property 1 and Property 2 be active assets under section 152-40 of the Income Tax Assessment Act 1997 ? | A1: Yes.

Relevant facts and circumstances: Individual A and Individual B jointly own Property 1, acquired more than 15 years ago. Trust C owns Property 2, acquired 10 years ago. Property 1 and Property 2 are referred to collectively as Properties. Individual A, Individual B and Trust C do not carry on a business. Trust D carries on a commercial storage business (Business) on the Properties. The Business commenced after the acquisition of Property 1. The Business has a number of storage sheds and containers on the Properties. Each client of the Business (Storer) is required to sign an agreement titled 'Australian Standard Self Storage Licence Agreement' (Agreement) using a template prepared by the Self Storage Association of Australasia. Storers enter into an Agreement to obtain a licence to a storage unit for the purpose of storing goods for a fixed period, with a minimum period of one week. They cannot conduct a business, reside, sleep, or party. They can only access the sites specifically to access their allocated unit during designated hours and leave. The licence is defined as a non-exclusive, non-sublicensable, non-transferable licence to access and use the allocated unit during access hours and does not confer any leasehold or other interest in the Properties. Storers are required to pay fees including security deposit on signing the Agreement, storage fee by monthly in advance, late payment fee, other additional fees such as cleaning, pest control emergency or security service call out, and default action costs. Access to the Properties is allowed within designated hours. The Properties have a gate which can only be opened with a registered key provided to Storers on commencement of their hiring arrangement. The common area at the Properties is under continuous CCTV and audio surveillance. In the event of default, access to a Storer's storage unit can be blocked by a padlock or other device being put on their unit. Trust D may take possession of the goods in storage and sell or dispose of the goods if the default is not rectified within the time limit. Trust D may also access the storage unit using necessary force and inspect the unit by any means using CCTV, microprobe, cameras. A 14 days' notice is issued to a Storer for access for the purpose of maintenance, repair or relocation. In the event of a breach or default access can be immediate and without notice. On the occurrence of certain unforeseen event such as fire, flood, earthquake, a Storer may be reallocated to another storage unit. A Real Estate Agent is engaged to carry out limited tasks such as: • advertising for the Business and organising signing of Agreements; • collecting storage fees and other fees; • making registered keys available for collection and drop off; • undertaking some inspections. Trust D provides services for both Properties as below: • operating security cameras; • general maintenance including mowing, wiper snipping, maintaining gardens, pest controls, weed spraying; • rubbish collection; • checking for leaks in storage units; • attending to repairs for the storage units, fencing and gates; • cleaning storage units which are not adequately cleaned or on request for an additional charge; • removing items left on-site from previous storer; • meeting with Storers who are unable to gain access to their storage unit (e.g. lost key); • organising replacement of lost keys for entry gate access; • organising contractor to transport containers which are taken off site or returned to site; • moving containers which are taken off site or returned to site; • advising on suitable locks; • undertaking some inspections; • providing 24/7 on call service to deal with storer request and issue; • monitoring email inbox to deal with storer requests and issues. The Business and the Properties are planned to be sold to a third party and a capital gain will be made on the sale. In the 4 income years immediately before the income year in which the sale is expected to occur, Trust C and Trust D made distributions to Individual A and Individual B at 50% each.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 152 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 paragraph 152-35(1) | Income Tax Assessment Act 1997 subsection 152-35(2) | Income Tax Assessment Act 1997 section 152-40 | Income Tax Assessment Act 1997 subsection 152-40(1) | Income Tax Assessment Act 1997 paragraph 152-40(1)(a) | Income Tax Assessment Act 1997 paragraph 152-40(4)(e) | Income Tax Assessment Act 1997 subsection 152-40(4A) | Income Tax Assessment Act 1997 section 152-47

Reasons for decision: Summary: All legislative references are to the ITAA 1997 unless otherwise indicated. For the small business concessions in Division 152 to apply to reduce or disregard a capital gain, the relevant CGT asset must satisfy the active asset tests in sections 152-35 and 152-40. The active asset test requires the relevant CGT asset to be an active asset: • for a total of at least half of the period specified in subsection 152-35(2) if you have owned the asset for 15 years or less (paragraph 152-35(1)(a)); or • for a total of at least 7.5 years during the period specified in subsection 152-35(2) if you have owned the asset for more than 15 years (paragraph 152-35(1)(b)). The period specified in subsection 152-35(2) begins when the asset was acquired and ends at the earlier of the CGT event and the cessation of the relevant business. A CGT asset is an active asset at a given time if, at that time, you own it and: • it is used (or held ready for use) in the course of carrying on a business by you, your affiliate or an entity connected with you (paragraph 152-40(1)(a)); or • it is an intangible asset that is inherently connected with a business that is carried on by you, your affiliate, or an entity connected with you (paragraph 152-40(1)(b)). Section 152-35 is therefore, satisfied as Property 1 and Property 2 were acquired 15 years ago and 10 years ago respectively and have been both used by Trust D to conduct the Business for the entire period. For the purpose of section 152-40, it is necessary to consider whether each of Individual 1, Individual 2 and Trust C is a connected entity of Trust D. | Detailed Reasoning - Individual A and Individual B: Subsection 328-125(1) states that an entity is connected with another entity if: (a) either entity controls the other entity in a way described in this section; or (b) both entities are controlled in a way described in this section by the same third entity. The tests for direct control of a discretionary trust are provided for in subsections 328-125(3) and 328-125(4). Relevantly, under subsection 328-125(4) an entity is taken to control a discretionary trust for an income year if, for any of the 4 preceding income years: (a) any income or capital of the trust was paid to or applied for the benefit of the entity and/or its affiliates; and (b) the amount paid or applied was at least 40% of the total amount of income or capital distributed by the trustee for that income year. In the 4 income years immediately before the income year in which the sale occurs, Individual A and Individual B each received 40% or more of the total amount distributions from Trust D in each year. Accordingly, Individual A and Individual B each controls Trust D and are connected with Trust D pursuant to subsection 328-125(4). Property 1 satisfies the requirements in section 152-35 and subparagraph 152-40(1)(a)(iii). | Detailed Reasoning - Trust C: In the 4 income years immediately before the income year in which the sale occurs, Individual A and Individual B each received X% or more of the total amount distributions from Trust C in each year. Therefore, Individual A and Individual B each controls Trust C pursuant to subsection 328-125(4). Trust C is connected with Trust D as they are controlled by the same entities in accordance with paragraph 328-125(1)(b). Property 2 satisfies the requirements in section 152-35 and subparagraph 152-40(1)(a)(iii). | Detailed Reasoning - The exception in subsection 152-40(4): Subsection 152-40(4) contains exceptions to the active asset test. Relevant for the purpose of this ruling is paragraph 152-40(e), which states that an asset whose main use is to derive rent cannot be an active asset. Whether an asset's main use is to derive rent will depend on the particular circumstances of each case. Taxation Determination TD 2006/78 Income tax: capital gains: are there any circumstances in which the premises used in a business of providing accommodation for reward may satisfy the active asset test in section 152-35 of the Income Tax Assessment Act 1997 notwithstanding the exclusion in paragraph 152-40(4)(e) of the Income Tax Assessment Act 1997 for assets whose main use is to derive rent? (TD 2006/78) states that a key factor in determining whether an occupant of premises is a lessee is whether the occupier has a right to exclusive possession ( Radaich v. Smith (1959) 101 CLR 209; Tingari Village North Pty Ltd v. Commissioner of Taxation [2010] AATA 233 at paragraphs 44-46, 2010 ATC 10-131, 78 ATR 693). Some factors that might point to exclusive possession include the degree of control or effective control the occupant has over the premises; the occupant's ability to exclude the owner and all others from the premises, subject to a limited right of entry by the owner to inspect or repair; the retention by the owner of a general right of entry to the premises. The terms of the Agreement in this case allow Storers only to enter and use their allocated space for permitted use to store goods. Storer may enter into an Agreement for a short-term period of one week. Under the arrangement, Storers can only enter the Properties and use their storage unit during designated hours. The Properties are gated and locked with entry controlled by keys and are alarmed and under continuous CCTV surveillance. The right to enter and use the allocated storage unit is a non-assignable and non-exclusive licence and does not confer any leasehold or other interest in the Properties. The Agreement grants Storers a licence to use a space for a specific purpose to store goods. They cannot use the allocated space for other purposes such as working, sleeping or partying. Trust D has the right to relocate a Storer to another storage space in certain circumstances and may enter a storage unit using all necessary force with or without the consent of a Storer in certain circumstances. Access to a storage unit can be blocked and goods stored sold or disposed of by Trust D. Goods handling equipment such as walking stackers, trolleys are made available for Storers to use. Other than storage fee, Storers are charged a fee for other services provided, such as cleaning, pest control emergency or security service call out. Example 2 in TD 2006/78 considers whether a tenant-landlord relationship exists in the case of a commercial storage business and concludes that users of the storage sheds do not have the right to exclusive possession and a tenant/landlord relationship does not exist. The facts of this case are similar to the facts in Example 2 of TD 2006/78. Accordingly, the Properties are not excluded by paragraph 152-40(4)(e) and are active assets under section 152-40.