Private ruling: CGT - 15-year exemption
Date of advice: 13 February 2026
Published: 30 March 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

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 property? | A1: Yes

Relevant facts and circumstances: You are a relief teacher working from nil to 40 hours a week. You also carry on a sole trader business. You acquired a property in 19XX as the sole owner. A portion of the property was used for your business, from January 19XX to December 20XX, September 20XX to June 20XX, and August 20XX to August 20XX. The floor area used was 12.8% of the total area. You rented the property for a total of 3 years and 7 months. You sold the property in September 20XX. You moved to a small regional town. You have not operated your business since selling your property. Your new home does not have suitable business space. You have only worked one day since September 20XX. Since selling your property, you consider yourself retired and have no definitive plans to recommence lessons at home. You were over 55 years old at the time of selling your property.

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: You meet the conditions to apply the 15-year exemption under section 152-105 of the ITAA 1997 as you satisfy the basic conditions in Subdivision 152-A of the ITAA 1997, you owned the property for more than 15 years, you were over 55 at the time of the CGT event and the event was made in connection with your retirement. | Detailed Reasoning - Detailed reasoning: Basic Conditions You meet the basic conditions for relief if: (a) A CGT event occurs in relation to a CGT asset of yours (b) The event would have resulted in a gain (c) At least one of the following applies: a. you are a small business entity b. you do not carry on business (other than as a partner) but your CGT asset is used in a business carried on by a small business entity that is your affiliate or an entity connected with you passively-held assets) c. you are a partner in a partnership that is a small business entity, and the CGT asset is i. an interest in a partnership asset (partnership assets), or ii. an asset you own that is not an interest in a partnership asset (partner's assets) which is used in the business of the partnership (d) The CGT asset satisfies the active asset test A CGT asset satisfies the active asset test if; you have owned the asset for 15 years or less and the asset of your for a total of at least half the period from when you purchased the asset from when you sell it; or, if 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 from when you purchased the asset, from when you sell the asset. A CGT asset is an active at a time if, at that time, you own the asset, and it is used, or held ready for use, in the course of business that is carried on by you, your affiliate, or another entity that is connected with you. However, Section 152-40(4)(e) of the ITAA 1997 excludes from being an active asset any asset whose main use is to derive rent. Section 152-105 of the ITAA 1997 says that for an individual to be eligible for the small business 15-year exemption it must satisfy the basic conditions and two further conditions: 1. You continuously owned the CGT asset for the 15-year period ending just before the CGT event; and 2. Either a. You are 55 or over at the time of the CGT event and the event happens in connection with their retirement; or b. You are permanently incapacitated at the time of the CGT event. In connection with retirement Whether a CGT event happens in connection with an individual's retirement depends on the particular circumstances of each case. A CGT event may be in connection with your retirement even if it occurs at some time before retirement. The Explanatory Memorandum (EM) to the New Business Tax System (Capital Gains Tax) Bill 1999 makes the following comments about the requirement to be permanently incapacitated or retiring as one of the conditions for the concession: 1.68 One of the requirements of this concession for an individual small business taxpayer is that they must be either permanently incapacitated at the time of the CGT event, or at least 55 years old and using the capital proceeds for their retirement. The provisions relating to the small business 15-year exemption do not refine what is meant by the phrase 'in connection with your retirement', nor does it give any indicate of the degree of retirement required in order to take advantage of this concession. It could be argued that the phrase 'in connection with retirement' means that the capital gain arising from the disposal of active assets is to be used to provide funds for a person's retirement rather than to precipitate retirement at the time of the CGT event. | Detailed Reasoning - Application to your circumstances: You sold your home which you had used in your small business, resulting in a capital gain. Although you rented the property for a total of X years and X months during your X years of ownership, this rental use was only temporary, so the property still qualifies as an active asset for CGT purposes. You meet the basic small business CGT concession requirements, and you also satisfy the additional conditions for the 15-year exemption. The Commissioner is satisfied you have met all the conditions to disregard the capital gain made on the disposal of your property for the small business 15-year exemption.