Private ruling: CGT - 15-year exemption
Date of advice: 9 April 2026
Published: 15 June 2026
Ruling period: Year ending 20XX
Date scheme commenced: X July 20XX

Ruling: Q1: Will you satisfy the basic conditions for small business capital gains tax (CGT) relief in section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of the sale of the Sale Assets? | A1: Yes. | Q2: Will you be eligible to apply the small business 15-year exemption in section 152-110 of the ITAA 1997 to disregard the capital gain you make from the disposal of each of the Sale Assets? | A2: Yes.

Relevant facts and circumstances: You are the head company for the following subsidiary entities: • X Company • Y Company • Z Company You have no other connected entities or affiliates You have X ordinary shares on issue of which Y ordinary shares (>20%) are held by the shareholder and the remaining Z shares are held by a third party. The shareholder acquired more than 20% of the X ordinary shares on issue around the time you were incorporated (more than 15 years ago). Around that time you acquired a business including associated business goodwill (Goodwill) and land and buildings (Business Premises) (collectively the Sale Assets) You currently run the following businesses through your subsidiaries: • X Company retails bulk product to farmers, a local mine and the local council from the Business Premises. These sales are mostly made to ultimate consumers for use in their business except for an occasional sale to another business. • Y Company is undertaking the development of an X farm at X by leasing the farm from the shareholder and their spouse but has not derived any income from this farm. • Z Company operates the business and services from the Business Premises. The main business of the company involves shop sales and retail sales. You provide management services to all of your subsidiary entities. You used the Sale Assets to carry on a X business from acquisition to X June 20XX. From on or about X July 20XX you leased the business building and related Xl business to Z Company and continue to do so to date. Z Company used the Sale assets to carry on the X business for a period of time. Later, the shop and services were leased out to third parties for undertaking shop sales and as an agent for Z Company for X retailing. Z Company terminated the sublease with the third party and again started running the shopfront business on its own and continues to do so to date. You intend to restructure your activities by separating the Sale Assets from your other businesses and assets to achieve asset protection, succession planning and business efficiencies. Under the proposed restructure, you intend to sell the Sale Assets to a newly established company owned by a family trust to be established for the benefit of the X family (New Trust) and X, in the same proportions as the shares are currently held by the Shareholder and the third party. Prior to the implementation of the restructure, the group's principal business of the retail service station business conducted by X Company has been sold and the premises have been leased to an independent third party. The shareholder was actively involved in the day-to-day operations of the X business, including accounting, bookkeeping and operational management functions prior to its disposal. Following the disposal of the X business and leasing of the premises, the shareholder's involvement has reduced from X hours to approximately Y hours per week. The farming activity located at X is currently at pre-operation stage and is largely managed by the shareholder's child. The shareholder's involvement is limited to approximately x-x hours per week and is not expected to increase. The shareholder is 55 years of age or over. In the 20XX-YY financial year: • your annual income from providing management services to your subsidiaries and the lease rental was $D • the annual income from retail X sales by Z Company was $H • the total non-X sales income of Z Company was $E • the total amount of retail X sales by X Company was $F • the total amount of X sales to non-ultimate consumers by X Company was $G • Y Company did not derive any income. If you elect to make a payment of the exempt amount to your CGT concession stakeholder pursuant to section 152-125 of the ITAA 1997, the payment will be made partly by way of an effective set-off against existing shareholder loan balances and the balance will be paid in cash within the timeframe prescribed by the legislation.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 152-A | Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 subsection 152-10(1) | Income Tax Assessment Act 1997 subsection 152-10(1AA) | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-40 | Income Tax Assessment Act 1997 Subdivision 152-B | Income Tax Assessment Act 1997 section 152-110 | Income Tax Assessment Act 1997 section 328-110 | Income Tax Assessment Act 1997 section 328-115 | Income Tax Assessment Act 1997 subsection 328-115(1) | Income Tax Assessment Act 1997 subsection 328-115(3) | Income Tax Assessment Act 1997 paragraph 328-115(3)(a) | Income Tax Assessment Act 1997 paragraph 328-115(3)(b) | Income Tax Assessment Act 1997 paragraph 328-115(3)(c) | Income Tax Assessment Act 1997 subsection 328-120(1) | Income Tax Assessment Act 1997 subsection 328-120(3) | Income Tax Assessment Act 1997 subsection 328-120(4)

Reasons for decision: Summary: A CGT event will happen in relation to the Sale Assets when they are sold and you will make a capital gain from the disposals. In addition, you will be a CGT small business entity in the year of the CGT event and the Sale Assets will satisfy the active asset test. As such, you satisfy the basic conditions for small business CGT relief. | Detailed Reasoning - Detailed reasoning: Subdivision 152-A of the ITAA 1997 contains the basic conditions that must be satisfied for small business CGT relief. The basic conditions, as set out in subsection 152-10(1) of the ITAA 1997 are: (a) a CGT event happens 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 (iii) you are a partner in a partnership that is a small business entity for the income year and the CGT asset is an interest in an asset of the partnership (iv) the conditions mention in subsections (1A) or (1B) are satisfied in relation to the CGT asset is an interest in an asset of the partnership (d) the CGT asset satisfies the active asset test. Relevantly, subsection 152-10(1AA) of the ITAA 1997 provides: 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 [of the ITAA 1997] to $ 10 million were a reference to $ 2 million. Section 328-110 of the ITAA 1997 provides: 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, or (ii) your aggregated turnover for the current year is likely to be less than $ 10 million. Broadly, your aggregated turnover for a year is the sum of your annual turnover together with the annual turnover of any entity that is an affiliate or is connected with you (subsection 328-115(1) of the ITAA 1997). However, your aggregated turnover for an income year does not include amounts derived by you or any entity that is an affiliate or is connected with you: • from dealings between you and the relevant entity while the relevant entity is connected with you or is your affiliate (paragraph 328-115(3)(a) of the ITAA 1997) • from dealings between the relevant entity and another relevant entity while each relevant entity is connected with you or is your affiliate (paragraph 328-115(3)(b) of the ITAA 1997) • while the entity is not connected with you and is not your affiliate (paragraph 328-115(3)(c) of the ITAA 1997). 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 (subsection 328-120(1) of the ITAA 1997). However, In working out an entity's annual turnover for an income year, do not include any amounts of ordinary income the entity derives from sales of retail product (subsection 328-120(3) of the ITAA 1997). Also, in working out an entity's annual turnover for an income year, the amount of ordinary income the entity derives from any dealings with an associate of the entity is the amount of ordinary income the entity would derive from the dealing if it were at arm's length (subsection 328-120(4) of the ITAA 1997). | Detailed Reasoning - Active asset: The term 'active asset' is defined in subsection 995-1(1) to have the meaning given by section 152-40 of the ITAA 1997. Section 152-40 relevantly reads: 152-40(1) 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. Section 152-35 regarding the active asset test relevantly reads: 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 your for a total of at least half of the period specified in subsection (2); (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 1/2 years during the period specified in subsection (2). 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. | Detailed Reasoning - Application to your circumstances: You satisfy the basic conditions in section 152-10 of the ITAA 1997 because: • a CGT event will happen when you dispose of each of the Sale Assets • you will make a capital gain from each of the disposals • you are a CGT small business entity as your aggregated turnover is less than $2 million after taking into account the exclusions set out in subsection 328-115(3) of the ITAA 1997 for amounts derived from dealings between associates and subsection 328-120(3) of the ITAA 1997 for sales of retail product • in addition, you have owned the Sale Assets for more than 15 years and they have been used in the course of carrying on a business by you and entities connected with you for a total of at least 7 1/2 years. | Summary: You satisfy the basic conditions contained in section 152-10 of the ITAA 1997, and the additional conditions for the small business 15-year exemption for companies and trusts in section 152-110 of the ITAA 1997 in relation to the disposals of the Sales Assets to X. You can disregard the capital gains you make on the disposals. | Detailed Reasoning - Detailed reasoning: Subdivision 152-B of the ITAA 1997 outlines the small business 15-year exemption. Under this Subdivision, a CGT small business entity can choose to disregard a capital gain arising from the disposal of a CGT asset that it has owned for at least 15 years if certain conditions are met. Section 152-110 of the ITAA 1997 provides that a company can disregard any gain arising from a CGT event if all of the following conditions are satisfied: (a) the basic conditions in Subdivision 152-A of the ITAA 1997 are satisfied (b) the company continuously owned the CGT asset for the 15-year period ending just before the CGT event (c) the company had a significant individual for a total of at least 15 years during which the company owned the CGT asset, and (d) the significant individual of the company just before the CGT event either: i. was 55 or over at the time of the CGT event and the event happens in connection with the significant individual's retirement; or ii. the significant individual is permanently incapacitated at the time of the CGT event. | Detailed Reasoning - Application to your circumstances: In your case, you satisfy the basic conditions as outlined in question 1 above. In addition: • you will have continuously owned the Sale Assets for the 15-year period ending just before the CGT event • you will have had a significant individual for a total of at least 15 years as the shareholder has owned more than 20% of the shares issued in you during the period you owned the Sale Assets, and • the shareholder will be a significant individual of yours just before you dispose of the Sale Assets, and • the shareholder will be 55 or over at that time and with the significant reduction in hours worked by the shareholder it is considered that the disposals will happen in connection with the shareholder's retirement. You satisfy the basic conditions contained in section 152-10 of the ITAA 1997 and the additional conditions for the small business 15-year exemption for companies in section 152-110 of the ITAA 1997 in relation to the disposals of the Sales Assets. As such, you can disregard the capital gains you make on the disposals of the Sale Assets.