Private ruling: Small Business 15-year exemption
Date of advice: 3 September 2025
Published: 3 November 2025
Ruling period: Year ending 30 June 2023
Date scheme commenced: 1 July 2022

Ruling: Q1: Do you meet the conditions to apply the small business 15-year exemption under section 152-105 of the Income Tax Assessment Act 1997 (ITAA 1997) to disregard the capital gain made on the disposal of your interest in the property located at Property A and Property B? | A1: Yes

Relevant facts and circumstances: Property A was purchased in 19XX by your father. Property B was purchased in 19XX by your father. Both properties join on the back fence line. Your father ran a car wrecking business from the properties. Your father died and you acquired 50% interest of both properties as a tenant in common with your brother. In 20XX you carried on the business in partnership with your brother. Your role in the business was sales, mechanical and bookwork. You worked 40 hours per week. Your brother ceased being a partner in 20XX. You carried on the business in a new partnership. In December 20XX you signed a contract of sale for the properties. Property A was sold for $X, and Property B was sold for $X. You continued to work at the business until settlement in June 20XX. Just before the sale of the properties, your net asset value, including any connected or affiliated entities was below $X. Since the sale of the properties, you have retired and are no longer working. At the time of the CGT event you were over the age of 55

Relevant legislative provisions: Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-40 | Income Tax Assessment Act 1997 section 152-105

Reasons for decision: Summary: Section 152-105 of the ITAA 1997 states 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 (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 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; (ii) or you are permanently incapacitated at the time of the CGT event. Subsection 152-10(1) of the ITAA 1997 provides that a capital gain, you can reduce or disregard a capital gain under this division if the following basic conditions are satisfied; (a) a CGT event happens in relation to a CGT asset of yours in an income year. (b) The event would have resulted in a gain, (c) 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 CGT small business entity for the income year and the CGT asset is an interest in 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 satisfied the active asset test. Subsection 152-40(1) of the ITAA 1997 provides that 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. Subsection 152-35(1) of the ITAA 1997 provides that 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). Subsection 152-35(2) of the ITAA 1997 provides 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. In Connection with retirement: Where a CGT event happens "in connection with an individual's retirement" depends on the particular circumstances of each case. In this regard, there would need to be at least a significant reduction in the number of hours the individual works or a significant change in the nature of their present activities to be regarded as retirement. However, it isn't necessary for there to be a permanent and everlasting retirement from the workforce. In your case you sold the properties which resulted in a capital gain. You satisfy the maximum net asset value test, as just before the sale of the properties your net asset value including any connected or affiliated entities was below $X. The properties were used in business carried on in a partnership with your brother for 15 years and then a separate partnership for 8 years. The properties satisfy the active asset test because they were used in a business you are connected with for more than 7.5 years of the ownership period. You were over 55 years at the time of the CGT event and you stopped working after the settlement date, which was 6 months after the contract date. Therefore, the Commissioner is satisfied that you meet the conditions to disregard the capital gain made on the disposal of your interest in Property A and Property B.