Private ruling: CGT - deceased estate - small business concessions
Date of advice: 24 November 2023
Published: 8 January 2024
Ruling period: Year Ended 30 June 20XY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the time limit to allow the small business capital gains tax concessions to be applied to the sale of Property X? | A1: Yes. | Q2: Will the Trustee for Deceased Individual A be entitled, under section 152-80 of the ITAA 1997, to apply the 15-year exemption (in Subdivision 152-B) to disregard any capital gain arising from the sale of the Pre-CGT Property Interest? | A2: Yes. | Q3: Will the Trustee for Deceased Individual A be entitled, under section 152-80 of the ITAA 1997, to apply the 15-year exemption (in Subdivision 152-B) to disregard any capital gain arising from the sale of the Post-CGT Property Interest? | A3: No. | Q4: Will the Trustee for Deceased Individual A be entitled, under section 152-80 of the ITAA 1997, to apply the small business 50% reduction (in Subdivision 152-C) to reduce the capital gain arising from the sale of the Post-CGT Property Interest? | A4: Yes. | Q5: Will the Trustee for Deceased Individual A be entitled, under section 152-80 of the ITAA 1997, to apply the small business retirement exemption (in Subdivision 152-D) to reduce the capital gain arising from the sale of the Post-CGT Property Interest? | A5: Yes.

Relevant facts and circumstances: Background Deceased Individual A was born on X January 19xx. She was XX years old when she passed away on XX September 20xx. Deceased Individual A's Will dated, XX February 20xx, named her three adult children (Individual B, Individual C and Individual D) as the executors of the estate (Executors). Under Deceased Individual A's Will, there were several assets allocated to specific beneficiaries. Clause X(xx) of Deceased Individual A's Will stated as follows. Property X is the subject of this private ruling application (PBR Application). This Property formed part of the Estate of Deceased Individual A (the Estate). Property X was originally acquired on XX November 19xx by Deceased Individual A and her husband as joint tenants (the Pre-CGT Property Interest). Deceased Individual A became the owner, by survivorship, of the remaining 50 percent of Property X upon the death of her husband on XX October 20xx (the Post-CGT Property Interest). While the intention of the Will was for the beneficiaries to share Property X equally, they negotiated that either: One or two of the beneficiaries would buy out the other's share; or The Executors would continue the business until they could sell Property X to a third party. The administration of the Estate by the Executors happened during the COVID pandemic. It made the administration and arrangement of matters more difficult than in normal circumstances. The events and activities that happened are as follows: • XX/09/20xx - The date of death of Deceased Individual A. • XX/10/20xx - The Executors looked at the Will the first time. They collated a listing of assets and liabilities and discussed various matters as outlined in your PBR Application. • XX/01/20xx - The Executors arranged for the valuation of various assets under the Estate, including Property X. • XX/03/20xx - Inspection of properties to complete the valuations. • XX/04/20xx - Executors received valuations (via email) from their valuers. • XX/05/20xx - Solicitors prepared initial draft of probate. • XX/07/20xx - A meeting was held at Solicitors to discuss a family deed of arrangement. It was discussed that one beneficiary would agree to sell his interest to Property X to one or two of the other beneficiaries. No deed of family arrangement was executed and/or rescinded. No beneficiary became absolutely entitled to Property X. Discussions continued for several months, and the beneficiaries also engaged their own solicitors to act on their behalf. • XX/10/20xx - Probate was granted. • XX/03/20XX - The Executors concluded that the buy-out arrangement agreed in July 20xx meeting was no longer a viable option. Instead, the Executors agreed to sell Property X on the open market. • XX/06/20XX - The Executors signed a 90 Day Exclusive Authority agreement with Latitude Real Estate to sell Property X. • XX/09/20XX - An offer was presented and accepted, with a 6-months' settlement. • XX/09/20XX - The purchaser signed the sale contract. • X/10/20XX - The Executors signed the sale contract. • XX/04/20XY - Settlement was postponed for another 30 days. • XX/05/20XY - Settlement occurred. Property X was sold on X October 20XX (date the Executors signed the contract of sale) and settlement took place on X May 20XY. Primary production business and the use of property At the time of her death, Deceased Individual A owned land which was used in the carrying on of a primary production business, as a sole trader. The business was carried on up to the date of her death. The business of primary production was carried on by Deceased Individual A on the following properties over a 45 plus year period: • Property X - Acquired 19xx. • Property A. • Property B. • Property C. The total size of the four properties is approximately XXX acres. The primary production business conducted on these properties was dairy farming with beef cattle grazing as a secondary enterprise. The properties were used in conjunction with each other. In November 20xx, the dairy herd was sold and then the main pursuits were beef farming, hay production and sales. The primary production activities started in the 19xxs under a partnership when the first property was acquired by Deceased Individual A and her husband. Then subsequent properties were purchased, and the business activities increased. Upon the death of her husband in October 20xx, Deceased Individual A carried on the business as a sole trader. Until the sale of the dairy herd in 20xx, Deceased Individual A was involved in the day to day running of the dairy farm business, which included milking duties and cattle/calf husbandry. After that, Deceased Individual A had a less hands on role in the operations but was responsible for the operational decisions up to the time of her death. Deceased Individual A's sons assisted in the running of the business. They tended to the animals, sowed and harvested the crops, and tended to any repairs across the properties. They were paid for their work, which was shown as share farming expenses in the financials of the business. There was no formal share farming arrangement in place. In the X years before Deceased Individual A's death, the herd size ranged from XXX to XXX head of cattle and the hay sales ranged from approximately $XX,000 to nil. For the income years ended XX June 20xx to 20xx, the financials of the primary production business have been provided, which forms part of the facts of this ruling. For the income years ended 30 June 20xx and 20xx, the aggregate turnover of the business was less than $2 million. Your PBR Application also submits that there were no affiliates and/or entities connected with Deceased Individual A. Further, Deceased Individual A's net assets at the time of her death were less than $6 million. Following Deceased Individual A 's death, the Executors continued to operate the primary production business until the sale of Property X. Other Details In May 20xx, the local water authority acquired a parcel of land that went through Property X as part of their water modernisation program. It bought the land either side of and including the channel which ran through Property X. As part of this purchase a registered plan of subdivision was completed, which split the original title. The new title shows Volume XXXXX, Folio XX on plan subdivision Volume XXXX, Folio XXX. The subdividing of the land in May 20xx did not result in a CGT event happening (section 112-25 of the ITAA 1997). During Deceased Individual A's ownership period, Property X was never leased. It was only used in the primary production operations carried on by Deceased Individual A. After Deceased Individual A's death, Property X has been used by external parties for agistment purposes on a per head charge basis. This was done to supplement income at times of low cattle prices. No written agreement was in placed (only a verbal arrangement between the Executors and the customers). At the time of signing the sale contract of Property X, a lease agreement was entered into in favour of one of the beneficiaries (i.e., to use Property X once the settlement was completed). The lease agreement, dated X October 20XX, commenced on X April 20XY (i.e., the initial expected settlement date). If Property X was sold immediately before Deceased Individual A's death, there would have been a capital gain associated with the sale of it. Deceased Individual A has not previously accessed the small business retirement exemption in Subdivision 152-D of the ITAA 1997. Your response (dated X October 20XX) to the ATO further information requested (dated XX September 20XY), also made the following submissions: • For the income year ended 30 June 20xx, there was no affiliate, or an entity that was connected to Deceased Individual A that was a CGT small business entity (per subsection 152-10(1A) of the ITAA 1997). • Property X was not used in the course of carrying on a business that is carried on by her affiliate or another entity that is connected with her (per subsection 152-40(1)).

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 102-5(1) | Income Tax Assessment Act 1997 section 112-25 | Income Tax Assessment Act 1997 section 128-50 | Income Tax Assessment Act 1997 Division 152 | Income Tax Assessment Act 1997 Subdivision 152-A | Income Tax Assessment Act 1997 Subdivision 152-B | Income Tax Assessment Act 1997 Subdivision 152-D | Income Tax Assessment Act 1997 subsection 152-10(1) | Income Tax Assessment Act 1997 subsection 152-10(1A) | Income Tax Assessment Act 1997 subsection 152-10(1AA) | Income Tax Assessment Act 1997 section 152-15 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 subsection 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 subparagraph 152-40(1)(a)(ii) | Income Tax Assessment Act 1997 subparagraph 152-40(1)(a)(iii) | Income Tax Assessment Act 1997 paragraph 152-40(1)(b) | Income Tax Assessment Act 1997 paragraph 152-40(4)(e) | Income Tax Assessment Act 1997 section 152-47(1A) | Income Tax Assessment Act 1997 section 152-80 | Income Tax Assessment Act 1997 subsection 152-80(1) | Income Tax Assessment Act 1997 paragraph 152-80(1)(d) | Income Tax Assessment Act 1997 subsection 152-80(2) | Income Tax Assessment Act 1997 paragraphs 152-80(2)(a) | Income Tax Assessment Act 1997 subsection 152-80(2A) | Income Tax Assessment Act 1997 paragraph 152-80(2A)(a) | Income Tax Assessment Act 1997 subsection 152-80(3) | Income Tax Assessment Act 1997 section 152-100 | Income Tax Assessment Act 1997 section 152-105 | Income Tax Assessment Act 1997 paragraph 152-105(d) | Income Tax Assessment Act 1997 subparagraph 152-105(d)(i) | Income Tax Assessment Act 1997 paragraph 152-110(1)(b) | Income Tax Assessment Act 1997 section 152-115 | Income Tax Assessment Act 1997 section 152-205 | Income Tax Assessment Act 1997 section 152-220 | Income Tax Assessment Act 1997 section 152-215 | Income Tax Assessment Act 1997 subsection 152-305(1) | Income Tax Assessment Act 1997 paragraph 152-305(1)(b) | Income Tax Assessment Act 1997 subsection 152-310(1)) | Income Tax Assessment Act 1997 paragraph 152-315(2)(a)) | Income Tax Assessment Act 1997 subsection 152-320(1) | Income Tax Assessment Act 1997 section 328-110 | Income Tax Assessment Act 1997 subsection 328-110(1) | Income Tax Assessment Act 1997 subsection 328-115 | Income Tax Assessment Act 1997 subsection 328-130(1) | Income Tax Assessment Act 1997 subsection 328-130(2) | Income Tax Assessment Act 1997 subsection 328-155(2) | Income Tax Assessment Act 1997 subsection 328-155(3) | Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision: Summary: All legislative references are to the Income Tax Assessment Act 1997 (ITAA 1997) unless otherwise stated. | Summary: Having considered the relevant facts and circumstances, the Commissioner will exercise the discretion under subsection 152-80(3) of the ITAA 1997 and allow an extension of time to 30 June 20XY. | Detailed Reasoning - Detailed reasoning: Section 152-80 allows a legal personal representative of a deceased individual to apply the small business CGT concessions in respect of the sale of the deceased's CGT assets where the following are satisfied: • the CGT asset forms part of the estate of the deceased individual (subparagraph 152-80(1)(a)(i)); • the CGT asset devolves to the legal personal representative of the deceased individual (subparagraph 152-80(1)(b)(i)); • the deceased would have been entitled to reduce or disregard a capital gain under Division 152 if a CGT event had happened in relation to the CGT asset immediately before his or her death (paragraph 152-80(1)(c)); and • a CGT event happens in relation to the CGT asset within two years of the individual's death (paragraph 152-80(1)(d)). | Detailed Reasoning - The CGT asset forms part of the estate of the deceased individual: Deceased Individual A owned Property X at the time of her death. For CGT purposes, Deceased Individual A owned two separate CGT assets (as defined in section 108-5) at the time of her death. These CGT assets were: 1. the Pre-CGT Property Interest i.e., the 50% interest in Property X that Deceased Individual A acquired on XX November 19xx; and 2. the Post-CGT Property Interest i.e., the 50% interest in Property X that Deceased Individual A acquired on XX October 20xx upon the death of her husband. Both, the Pre-CGT Property Interest and the Post-CGT Property Interest formed part of the Estate and, therefore, this condition is satisfied. | Detailed Reasoning - The CGT asset devolves to the legal personal representative of the deceased individual: A legal personal representative is defined to include an executor or trustee of a deceased estate (subsection 995-1(1)). The Pre-CGT Property Interest and the Post-CGT Property Interest devolved to the Executors and, therefore, this condition is satisfied. | Detailed Reasoning - A CGT event happens in relation to the CGT asset within two years of the individual's death: CGT event A1 happened on X October 20XX when the Executors entered into the contract to dispose of Property X. Deceased Individual A's date of death was XX September 20xx. Accordingly, on face value, this condition is not satisfied. Subsection 152-80(3), however, provides that the Commissioner may extend the time limit in paragraph 152-80(1)(d). In determining whether the 2-year time limit will be extended, the Commissioner considers the following factors: • evidence of an acceptable explanation for the period of the extension requested (and whether it would be fair and equitable in the circumstances to provide such an extension); • prejudice to the Commissioner which may result from the additional time being allowed (but the mere absence of prejudice is not enough to justify the granting of an extension); • unsettling of people, other than the Commissioner, or of established practices; • fairness to people in like positions and the wider public interest; • whether any mischief is involved; and • consequences of the decision. Having regard to these factors: • You have provided evidence explaining the reasons of why an extension of the 2-year time limit is required. The administration of the Estate by the Executors happened during the COVID pandemic. The Executors held meetings to discuss a family deed of arrangement, whilst continuing to operate the business. The restrictions and uncertainty associated with the COVID-19 pandemic also affected the administration of the Estate and the sale process. Property X was finally placed on the market for sale in June 20XX. The sale contract was executed just several months after the two-year limit allowed under paragraph 152-80(1)(d). • Extending the time period will not prejudice the Commissioner, nor will it involve the unsettling of people, other than the Commissioner or of established practices. The ability to apply for an extension of time is available to all people with similar circumstances and the decision to allow extra time is not unfair to people in like positions or detrimental to the wider public interest. • There is no evidence of any mischief and allowing the extension will enable you to apply the small business CGT concessions to reduce or disregard the capital gain made from the sale of Property X in the same way that you assert Deceased Individual A would have been able to do if the CGT assets had been sold immediately before her death. In the circumstances, the period of the extension you have requested is considered fair and reasonable and the Commissioner will exercise the discretion under subsection 152-80(3) to extend the time limit in paragraph 152-80(1)(d) to 30 June 20XY. As a consequence, the condition in paragraph 152-80(1)(d) is met. | Detailed Reasoning - Eligibility for small business concessions: Paragraph 152-80(1)(c) requires an examination of the extent to which the deceased would have been entitled to apply the CGT small business concessions if a CGT event had happened to the relevant CGT assets immediately before their death. Accordingly, in the current circumstances, it is necessary to consider whether Deceased Individual A would have been entitled to reduce or disregard the gain by applying the CGT small business concessions (including the 15-year exemption, the small business 50% reduction and the small business retirement exemption) if a CGT event had happened to the relevant CGT assets (the Pre-CGT Property Interest and the Post-CGT Property Interest) immediately before her death. Deceased Individual A's eligibility for these concessions is specifically considered further below. | Summary: In relation to the Pre-CGT Property Interest, Deceased Individual A would have satisfied all the relevant requirements under section 152-105 immediately before her death. Accordingly, by operation of section 152-80, the Executors are entitled to disregard the capital gain made from disposing of the Pre-CGT Property Interest in the same way as Deceased Individual A would have been able under Subdivision 152-B. | Detailed Reasoning - 15-year exemption for individuals: Subdivision 152-B provides that a CGT small business entity can disregard a capital gain arising from a CGT asset that it has owned for at least 15 years if certain conditions are met. Section 152-105 outlines the following conditions that an individual must satisfy to be eligible for the 15-year exemption: If you are an individual, you can disregard any capital gain arising from a CGT event if all of the following conditions are satisfied: (a) the basic conditions in Subdivision 152-A are satisfied for the gain; (b) you continuously owned the CGT asset for the 15-year period ending just before the CGT event; Note: Section 152-115 allows for continuation of the period if there is an involuntary disposal of the asset. (c) if the CGT asset is a share in a company or an interest in a trust-the company or trust had a significant individual for a total of at least 15 years (even if the 15 years was not continuous and it was not always the same significant individual) during which you owned the CGT asset; (d) either: (i) you are 55 or over at the time of the CGT event and the event happens in connection with your retirement; or (ii) you are permanently incapacitated at the time of the CGT event. | Detailed Reasoning - Condition (a) of section 152-105 - the basic conditions in Subdivision 152-A are satisfied for the gain: Subsection 152-10(1) sets out the basic conditions which must be satisfied for a capital gain to be reduced or disregarded under this Division, as follows: A capital gain (except a capital gain from CGT event K7) you make may be reduced or disregarded under this Division if the following basic conditions are satisfied for the gain: (a) a CGT event happened in relation to a CGT asset of yours in an income year; (b) the event would (apart from this Division) have resulted in the gain; (c) at least one of the following applies: (i) you are a CGT small business entity for the income year; (ii) you satisfy the maximum net asset value test (see section 152-15); (iii) you are a partner in a partnership that is a small business entity for the income year and the CGT asset is an asset of the partnership; (iv) the conditions mentioned in subsection (1A) or (1B) are satisfied in relation to the CGT asset in the income year; (d) the CGT asset satisfies the active asset test in section 152-35. | Detailed Reasoning - CGT small business entity: As defined in subsection 995-1(1), a CGT small business entity has the meaning given by subsection 152-10(1AA), as follows: You are a CGT small business entity for an income year if: (a) you are a small business entity for the income year; and (b) you would be a small business entity for the income year if each reference in section 328-110 to $10 million were a reference to $2 million. As defined in subsection 995-1(1), a small business entity has the meaning given by subsection 328-110(1), as follows: You are a small business entity for an income year (the current year) if: (a) you carry on a business in the current year; and (b) one or both of the following applies: (i) you carried on a business in the income year (the previous year) before the current year and your aggregated turnover for the previous year was less than $10 million; (ii) your aggregated turnover for the current year is likely to be less than $10 million. Subsection 995-1(1) also states a business includes any profession, trade, employment, vocation or calling, but does not include occupation as an employee. Section 328-115 defines 'aggregated turnover' as the sum of all 'relevant annual turnovers'. The relevant annual turnovers are outlined in subsection 328-115(2) and exclude any amounts covered by subsection 328-115(3). Further, subsection 328-120(1) sets out the meaning of annual turnover as follows: An entity's annual turnover for an income year is the total ordinary income that the entity derives in the income year in the ordinary course of carrying on a business. | Detailed Reasoning - Active asset test: Section 152-35 outlines the active assets test, as follows in subsection 152-35(1): A CGT asset satisfies the active asset test if: (a) you have owned the asset for 15 years or less and the asset was an active asset of yours for a total of at least half of the period specified in subsection (2); or (b) you have owned the asset for more than 15 years and the asset was an active asset of yours for a total of at least 7.5 years during the period specified in subsection (2). Further, subsection 152-35(2) of the ITAA 1997 outlines that the period: (a) begins when you acquired the asset; and (b) ends at the earlier of: (i) the CGT event; and (ii) if the relevant business ceased to be carried on in the 12 months before that time or any longer period that the Commissioner allows - the cessation of the business. Section 152-40 outlines the meaning of active asset in subsection 152-40(1) as follows: A CGT asset is an active asset at a time if, at that time: (a) you own the asset (whether the asset is tangible or intangible) and it is used, or held ready for use, in the course of carrying on a business that is carried on (whether alone or in partnership) by: (i) you; or (ii) your affiliate; or (iii) another entity that is connected with you; or (b) if the asset is an intangible asset - you own it and it is inherently connected with a business that is carried on (whether alone or in partnership) by you, your affiliate, or another entity that is connected with you. Paragraph 152-40(4)(e) outlines that the following CGT assets cannot be active assets: (e) An asset whose main use by you is to derive interest, an annuity, rent, royalties or foreign exchange gains unless: (i) the asset is an intangible asset and has been substantially developed, altered or improved by you so that its market value has been substantially enhanced; or (ii) its main use for deriving rent was only temporary. | Detailed Reasoning - Meaning of Affiliate: Under subsection 328-130(1), an individual or a company is an affiliate of yours if the individual acts, or could reasonably be expected to act, in accordance with your directions or wishes, or in concert with you, in relation to the affairs of the business of the individual or company. Based on the current facts and circumstances, it is considered that Deceased Individual A would have satisfied the basic conditions in Subdivision 152-A, if a CGT event had happened to the Pre-CGT Property Interest immediately before her death because: • The event would have resulted in a gain (thereby satisfying paragraph 152-10(1)(b)) - even though this gain may have been disregarded under paragraph 104-10(5)(a); • Deceased Individual A carried on a business of primary production up to her date of death (i.e., including during the income year ended 30 June 20xx). Her aggregated turnover for both the income year ended 30 June 20xx and 30 June 20xx was less than $2 million. There were also no affiliates and entities connected with Deceased Individual A. Further, Deceased Individual A's net assets at the time of her death were less than $6 million. Deceased Individual A was a CGT small business entity for income year 20xx and accordingly would have satisfied subparagraph 152-10(1)(c)(i) and, in turn, paragraph 152-10(1)(c). • Paragraph 152-10(1)(d) would also have been met because the Pre-CGT Property Interest would have satisfied the active asset test. In this regard, it is noted that the Pre-CGT Property Interest would have been an active asset because Deceased Individual A owned the Pre-CGT Property Interest from November 19xx to the date of her death, such that she owned it for more than 15 years and it was used in the course of carrying on her primary production business (as a sole trader and before this, in the partnership with her husband) for the whole of that period. Relevantly, Property X was never used to derive rental income before Deceased Individual A passed away (i.e., during the active asset test period), therefore, paragraph 152-40(4)(c) has no application. A lease agreement dated X October 20XX was only entered into at the time of signing the sale contract, which gave one of the beneficiaries use of Property X once settlement was completed. | Detailed Reasoning - Condition (b) of section 152-105 - the entity continuously owned the CGT asset for the 15-year period ending just before the CGT event;: As noted above, Deceased Individual A owned the Pre-CGT Property Interest from November 19xx until the time of her death in September 20xx and, therefore, the requirements in paragraph 152-105(b) (condition (b)) would have been satisfied. Condition (c) of subsection 152-105 - if the CGT asset is a share in a company or an interest in a trust-the company or trust had a significant individual for a total of at least 15 years (even if the 15 years was not continuous and it was not always the same significant individual) during which you owned the CGT asset; This condition is not applicable as the CGT asset in question (the Pre-CGT Property Interest) is not a share in a company or an interest in a trust. | Detailed Reasoning - (ii) you are permanently incapacitated at the time of the CGT event.: It is noted that, for the purposes of section 152-80, subparagraph 152-105(d)(i) is modified by paragraph 152-80(2)(a) so that paragraph 152-105(d) only requires the deceased individual to have been 55 or over, or permanently incapacitated, at the time of the CGT event referred to in paragraph 152-80(1)(c). In other words, there is no requirement that a CGT event happened in connection with Deceased Individual A 's retirement, only that Deceased Individual A was aged 55 or over at the time of her death. Deceased Individual A was XX at the time of her death and, therefore, the condition in paragraph 152-105(d) is satisfied. | Detailed Reasoning - Conclusion on Subdivision 152-B: Based on the above analysis, Deceased Individual A would have satisfied all requirements in section 152-105 immediately before her death and, therefore, would have been able to apply the small business 15-year exemption to disregard the capital gain from the Pre-CGT Property Interest if a CGT event had happened immediately before her death. | Detailed Reasoning - Conclusion on section 152-80: As detailed above in respect of Question 1, the Executors satisfy the requirements of section 152-80 in respect of the Pre-CGT Property Interest (which, in part, flows from the Commissioner's decision to exercise the discretion in subsection 152-80(3) so that the requirements of subsection 152-80(1) are satisfied). It is further noted that in these circumstances, Deceased Individual A would have been able to apply the small business 15-year exemption to disregard the capital gain from the Pre-CGT Property Interest if a CGT event had happened immediately before her death. Therefore, in accordance with subsections 152-80(2) and 152-80(2A), the Executors will also be entitled to disregard the capital gain that was made on the disposal of the Pre-CGT Property Interest on X October 20XX. | Summary: In relation to the Post-CGT Property Interest, Deceased Individual A would not have satisfied the requirements in section 152-105 immediately before her death because she had not owned the Post-CGT Property continuously for 15 years. Therefore, the Executors are not entitled to disregard the capital gain made from disposing of that interest via the operation of section 152-80 and Subdivision 152-B. | Detailed Reasoning - Condition (a) of subsection 152-105 - the basic conditions in Subdivision 152-A are satisfied for the gain: It is considered that Deceased Individual A would have satisfied the basic conditions in Subdivision 152-A if a CGT event had happened to the Post-CGT Property Interest immediately before her death because: • The event would have resulted in a gain (therefore satisfying paragraph 152-10(1)(b)); • For the reasons above, Deceased Individual A was a CGT small business entity for income year ended 30 June 20xx and, accordingly, would have satisfied subparagraph 152-10(1)(c)(i), and in turn, paragraph 152-10(1)(c); and • The Post-CGT Property Interest would have satisfied the active asset test in paragraph 152-10(1)(d) because it was an active asset that was used in the course of carrying on Deceased Individual A's primary production business from the time that the Post-CGT Property Interest passed to her by survivorship on XX October 20xx when her husband died, until the date of her death. | Detailed Reasoning - Condition (b) of subsection 152-105 - the entity continuously owned the CGT asset for the 15-year period ending just before the CGT event;: Deceased Individual A acquired the Post-CGT Property Interest when it passed to her by survivorship on XX October 20xx when her husband died. Accordingly, she did not continuously own the Post-CGT Property Interest for the 15 years prior to her death XX September 20xx and, therefore, she would not satisfy the requirements of paragraph 152-105(b). As a consequence, Deceased Individual A would not have been eligible to apply the 15-year exemption to disregard any gain from the Post-CGT Property Interest if a CGT event had happened immediately before death. | Detailed Reasoning - Conclusion on section 152-80: Because Deceased Individual A would not have been eligible to apply the 15-year exemption to disregard any gain from the Post-CGT Property Interest, it follows that the Executors cannot use the 15-year exemption, via the operation of section 152-80 (and Subdivision 152-B), to disregard the capital gain made from disposing of the Post-CGT Property Interest on X October 20XX. | Summary: As Deceased Individual A would have satisfied the basic conditions in Subdivision 152-A immediately before her death, she would have been entitled to apply the small business 50% reduction to the Post-CGT Property Interest. Accordingly, by application of section 152-80, the Executors are entitled to apply the small business 50% reduction to the capital gain arising from the sale of the Post-CGT Property Interest on X October 20XX. | Detailed Reasoning - Small business 50% reduction: Under section 152-205, the amount of a capital gain remaining after applying step 3 of the method statement in subsection 102-5(1) is reduced by 50%, if the basic conditions in Subdivision 152-A are satisfied for the gain. As detailed above in respect of Question 3, Deceased Individual A would have satisfied the basic conditions in Subdivision 152-A, if a CGT event had happened in relation to her Post-CGT Property Interest immediately before her death and, therefore, she would have been entitled to apply the small business 50% reduction to this gain. As explained above in respect of Question 1, the Executors satisfy the requirements of section 152-80 in respect of the Post-CGT Property Interest (which, in part, flows from the Commissioner's decision to exercise the discretion in subsection 152-80(3) so that the requirements of subsection 152-80(1) are satisfied). Thus, by operation of section 152-80, the Executors meet the conditions to apply the small business 50% reduction to the gain on the disposal of the Post-CGT Property Interest. | Summary: Deceased Individual A would have satisfied the basic conditions in Subdivision 152-A, if a CGT event had happened in relation to her Post-CGT Property Interest immediately before her death. She was over 55 and therefore, she could have chosen to disregard all, or part, of the capital gain on the Post-CGT Property Interest (up to the lifetime limit of $500,000 per individual) under Subdivision 152-D. Accordingly, by application of section 152-80, the Executors can apply the small business retirement exemption in Subdivision 152-D to reduce the gain (up to the lifetime limit of $500,000) arising from the sale of the Post-CGT Property Interest on X October 20XX. | Detailed Reasoning - Small business retirement exemption: Subsection 152-305(1) provides that if you are an individual, you can choose to disregard all or part of a capital gain if: (a) the basic conditions in Subdivision 152-A are satisfied for the gain; and (b) if you are under 55 just before you make the choice - you contribute an amount equal to the asset's CGT exempt amount to a complying superannuation fund or an RSA; and (c) the contribution is made: (i) if the relevant CGT event is CGT event J2, J5 or J6 - when you made the choice; or (ii) otherwise - at the later of when you made the choice and when you received the proceeds. Where an individual makes the choice to apply the small business retirement exemption, the amount of capital gain chosen will be disregarded from your assessable income (subsection 152-310(1)). The choice made must be made in a way that ensures the individual does not exceed the CGT retirement exemption limit (paragraph 152-315(2)(a)). Subsection 152-320(1) states that an individual's CGT retirement exemption limit at a time is $500,000 reduced by the CGT exempt amounts of CGT assets specified in choices previously made by or for the individual under Subdivision 152-E. As detailed above in relation to Question 3, Deceased Individual A would have satisfied the basic conditions in Subdivision 152-A if a CGT event had happened in relation to her Post-CGT Property Interest immediately before her death. Deceased Individual A was over 55 years of age immediately before her death, thus, there is no requirement to pay any amount into a complying superannuation fund or a retirement savings account (although it is noted that paragraph 152-80(2)(b) disregards this condition). Relevantly, Deceased Individual A has not previously utilised any amount of her CGT retirement exemption limit of $500,000. Therefore, Deceased Individual A could have chosen to disregard all, or part, of the capital gain on the Post-CGT Property Interest using the small business retirement exemption under Subdivision 152-D (up to the lifetime limit of $500,000), if a CGT event had happened in relation to her Post-CGT Property Interest, immediately before her death. As detailed above in respect of Question 1, the Executors satisfy the requirements of section 152-80 in respect of the Post-CGT Property Interest (which, in part, flows from the Commissioner's decision to exercise the discretion in subsection 152-80(3) so that the requirements of subsection 152-80(1) are satisfied). Thus, by operation of section 152-80, the Executors meet the conditions and are entitled to apply the small business retirement exemption in Subdivision 152-D to the gain arising from the sale of the Post-CGT Property Interest.