Private ruling: Small business concession basic conditions
Date of advice: 15 January 2021
Published: March 2021
Ruling period: 1 July 20XX to 30 June 20XA
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the Family Trust (the Trust) a CGT small business entity under subparagraph 152-10(1)(c)(i) of the Income Tax Assessment Act 1997 (ITAA 1997) and a small business entity under section 328-110 of the ITAA 1997 for the income year in which the CGT event occurred? | A1: Yes | Q2: Do the shares satisfy the active asset test at the time of the CGT event under paragraph 152-10(1)(d) and section 152-35 of the ITAA 1997? | A2: Yes | Q3: Did the Trust satisfy the additional conditions outlined in subsection 152-10(2) of the ITAA 1997 where the CGT event involves sale of shares in a company (other than in relation to the existence of a CGT concessional stakeholder in paragraph 152-10(2)(d) of the ITAA 1997)? | A3: Yes

Relevant facts and circumstances: Trust The Trust is a discretionary trust and was established pursuant to a deed of settlement dated X XXXX 20XX. The original trustees of the Trust were Individual A (A)) and Individual B (B). Company C (C) become the Trustee by a deed of retirement and appointment of trustee dated X XXX 20XX. Immediately prior to the CGT event, the Trust owned X ordinary shares in Company D (D), which represented under 40% of the D's issued shares. On XX XXX 20XX, The Trust, together with other owners of the issued shares in the Company, (the Sellers), entered into an Option Deed with Company E (E), the (E Option Deed). The Sellers by entering into the E Option Deed granted a call option over the shares in D to E. On the same day, E entered into an Option Deed with Company F (F), the (F Option Deed). Pursuant to the F Option Deed, the Sellers (including the Trust) granted a call option to F to procure that E enter into a share purchase agreement to sell the shares in D to F. The Option Deeds were part of an arrangement whereby an unrelated company, F would acquire the shares in the D, capitalise it and develop the Project. E is a member of the G Group. At the date of the Option Deeds, D's assets comprised options to enter into a number of leases for land upon which the Project is proposed to be developed. Following the execution of the Option Deeds, D continued to develop the Project, which included moving the Project towards a point where construction of Alternatives could commence. Pursuant to the F Option Deed, D was required to provide services in connection with the Project, for which it is entitled to a monthly management fee (of approximately $XX,XXX) from F. The Services Agreement and contents form part of these facts. On XX XXXX 20XX, F entered into a Share Purchase Agreement with E, (the F SPA). Pursuant to which F agreed to acquire the shares in D from E, subject to condition precedents, which included: (a) Completion of the restructure steps - including E becoming the legal and beneficial owner of the shares in D from the Sellers; (b) Approval from the Treasurer under the Foreign Acquisitions and Takeovers Act 1975. On XX XXXX 20XX (the date of the CGT Event), the Sellers entered into and completed the E Share Purchase Agreement, (E SPA), for the sale of the shares in D to E. This was the relevant CGT event for the Trust. The purchase price for the Trust's shares is determined pursuant to the E SPA, and comprises: (a) An initial Purchase Price of $X,XXX,XXX for all shares (equating to a payment of $X,XXX,XXX for the Trust's less than 40%% interest); (b) The balance payment subject to the achievement of milestones upon: (i) Development milestone; (ii) Financing Milestone (the Earnouts). The Earnouts are to be calculated upon the achievement of the relevant milestones and based upon the aggregate design capacity of the Alternatives of the Project. This figure cannot be ascertained at present as it will depend on the progress of the Project, which is highly contingent upon a number of factors. This ruling does not consider the taxation treatment of the Earnouts. The Business conducted by the Trust The Trust acquired a business (the Business) on XX XXXX 20XX from C. You have supplied the Business Sale Agreement and its contents form part of these facts. At the date of the CGT event, the Trust conducts the Business (being a business trading as Company G), which provides consultancy services. The Business has provided consultancy services for over XX years to third party clients. Over its 20 year history, several employees have worked in the Business. Currently, A works in the Business along with one additional part-time employee. The Trust's annual turnover for the current year ended 30 June 20XA is anticipated to be $XXX,XXX. This revenue will be generated from consultancy services the Trust will provide to F, Company H (H) and others. Copies of invoices issued to F, H and other entities were provided with the application and their content form part of these facts. At the time of the CGT Event, the Trust did not satisfy the maximum net asset value test under section 152-15 of theITAA 1997 . The Company D On the date of the CGT event, the Sellers owned 100% of the issued capital of D. Of this, the Trust less than 40% of the ordinary shares in D. D conducts the business of the Project, and all its assets are used, or held ready for use in the conduct of that business. D's annual turnover for the year ended 30 June 20XX was $XX,XXX. D's annual turnover for the year ended 30 June 20XA was $XXX,XXX. D's annual turnover for the year ended 30 June 20XA is anticipated to be less than $XX,XXX. The assets of D as at the date of the CGT Event were provided and 100% of all assets were considered Active Assets: Maximum Net Asset Value Test At the time of the CGT event, D's net assets were $XXX,XXX, and D satisfied the maximum net asset test under section 152-15 ITAA 1997. The balance sheet of D at 30 June 20XX was supplied with your application for ruling and its contents form part of these facts. The value of assets as at the date of the CGT Event is materially identical to that recorded on the balance sheet as at 30 June 20XX. Connected Entities of the Trust The Trust is controlled under subsection 328-125(3) of the ITAA 1997 by A and B because they are the directors of the trustee of the Trust (C) and the trustee acts in accordance with their wishes. Other entities controlled directly or indirectly by A and B, or otherwise connected with the Trust, are: (a) An Offshore Trust, which holds shares in an offshore entity, which holds an investment property and cash but does not conduct a business; (b) H and its subsidiaries; and (c) C, the trustee of the Trust. H The Trust is the sole shareholder of H. H's annual turnover for the year ended 30 June 20XX was $XXX,XXX. H is the sole shareholder of three subsidiaries: (a) Company J (J); (b) Company K (K); and (c) Company L (L). H's annual turnover for the current year ended 30 June 20XA is anticipated to be $XXX,XXX. This income will be derived from the investment in, and management of, renewable energy projects. This is based upon a reasonable projection of the turnover received year-to-date and extrapolated across the year. J's annual turnover for the current year ended 30 June 20XA is anticipated to be Nil. K's annual turnover for the current year ended 30 June 20XA is anticipated to be Nil. L's annual turnover for the current year ended 30 June 20XA is anticipated to be Nil. D is not a connected entity of the Trust as the Trust owns less than 40% of the shares on issue of D. The Trust's aggregated turnover for the current year ended 30 June 20XA is anticipated to be: (a) The Business - $XXX,XXX (less whatever the Business derives from Consultancy Services to H because of paragraph 328-115(3)(a) of ITAA 1997; (b) H - $XX,XXX; (c) J -Nil; and (d) K - Nil. (e) L - Nil; and (f) C, annualised income from Business $XXX,XXX.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 152 | 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 paragraph 152-10(1)(a) | Income Tax Assessment Act 1997 paragraph 152-10(1)(b) | Income Tax Assessment Act 1997 paragraph 152-10(1)(c) | Income Tax Assessment Act 1997 subparagraph 152-10(1)(c)(i) | Income Tax Assessment Act 1997 subparagraph 152-10(1)(c)(ii) | Income Tax Assessment Act 1997 paragraph 152-10(1)(d) | Income Tax Assessment Act 1997 subsection 152-10(1AA) | Income Tax Assessment Act 1997 subsection 152-10(1A) | Income Tax Assessment Act 1997 subsection 152-10(1B) | Income Tax Assessment Act 1997 subsection 152-10(2) | Income Tax Assessment Act 1997 paragraph 152-10(2)(d) | Income Tax Assessment Act 1997 subsection 152-10(2A) | Income Tax Assessment Act 1997 paragraph 152-10(2A)(a) | Income Tax Assessment Act 1997 paragraph 152-10(2A)(b) | Income Tax Assessment Act 1997 paragraph 152-10(2A)(c) | Income Tax Assessment Act 1997 paragraph 152-10(2A)(d) | Income Tax Assessment Act 1997 paragraph 152-10(2A)(e) | Income Tax Assessment Act 1997 section 152-15 | Income Tax Assessment Act 1997 subsection 152-20(1) | Income Tax Assessment Act 1997 subsection 152-20(2) | Income Tax Assessment Act 1997 section 152-35 | 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 paragraph 152-40(1)(b) | Income Tax Assessment Act 1997 subsection 152-40(3) | Income Tax Assessment Act 1997 paragraph 152-40(3)(a) | Income Tax Assessment Act 1997 paragraph 152-40(3)(b) | Income Tax Assessment Act 1997 subparagraph 152-40(3)(b)(ii) | Income Tax Assessment Act 1997 subparagraph 152-40(3)(b)(iii) | Income Tax Assessment Act 1997 section 328-110 | Income Tax Assessment Act 1997 subsection 328-110(1) | Income Tax Assessment Act 1997 paragraph 328-110(1)(a) | Income Tax Assessment Act 1997 subsection 328-110(3) | Income Tax Assessment Act 1997 section 328-115 | Income Tax Assessment Act 1997 paragraph 328-115(3)(a) | Income Tax Assessment Act 1997 section 328-120 | Income Tax Assessment Act 1997 subsection 328-120(1) | Income Tax Assessment Act 1997 subsection 328-125(1) | Income Tax Assessment Act 1997 subsection 328-125(2) | Income Tax Assessment Act 1997 paragraph 328-125(2)(b) | Income Tax Assessment Act 1997 subsection 328-125(3) | Income Tax Assessment Act 1997 section 328-130 | Income Tax Assessment Act 1997 subsection 328-130(1) | Income Tax Assessment Act 1997 subsection 328-130(2) | Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision: Summary: The Trust qualifies as a CGT small business entity under subparagraph 152-10(1)(c)(i) of the ITAA 1997 and a small business entity under section 328-110 of the ITAA 1997 for the income year in which the CGT event occurred. | Detailed Reasoning - Detailed reasoning: There are certain capital gains tax (CGT) concessions specifically available to small business taxpayers. There are conditions that must be satisfied to obtain access to the concessions set out in Subdivision 152-A of the ITAA 1997. The basic conditions are set out in section 152-10 of the ITAA 1997. They are: (1) a CGT event happens in relation to a CGT asset that the taxpayer owns: paragraph 152-10(1)(a) of the ITAA 1997 (2) the event would otherwise have resulted in a capital gain: paragraph 152-10(1)(b) of the ITAA 1997 (3) at least one of the following applies (paragraph 152-10(1)(c) of the ITAA 1997): • the taxpayer is a "CGT small business entity" for the income year • the taxpayer satisfies the maximum net asset value test • the taxpayer is 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 and • the conditions mentioned in subsection 152-10(1A) or 152-10(1B) of the ITAA 1997 are satisfied in relation to the CGT asset in the income year. (4) the asset satisfies the active asset test: paragraph 152-10(1)(d) of the ITAA 1997. . | Detailed Reasoning - (i) you are a CGT small business entity for the income year: CGT small business entity is defined in subsection 152-10(1AA) of the ITAA 1997. It states: You are a CGT small business entity for the 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. Section 328-110 of the ITAA 1997 provides: 328-110(1) 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. 328-110(2) You work out your *aggregated turnover for the current year for the purposes of subparagraph (1)(b)(ii): (a) as at the first day of the current year; or (b) if you start to carry on a *business during the current year - as at the day you start to carry on the business. Note: Subsection 328-120(5) provides for how to work out your annual turnover (which is relevant to working out your aggregated turnover) if you do not carry on a business for the whole of an income year. Exception: aggregated turnover for 2 previous income years was $10 million or more 328-110(3) However, you are not a small business entity for an income year (the current year ) because of subparagraph (1)(b)(ii) if: (a) you carried on a *business in each of the 2 income years before the current year; and (b) your *aggregated turnover for each of those income years was $10 million or more. | Detailed Reasoning - Application of the law to your circumstances.: Subsection 152-10(1AA) of the ITAA 1997 outlines you are considered to be a CGT small business entity if you are a small business entity under section 328-110 of the ITAA 1997 and references to $10 million is read as a reference to $2 million. The Trust carries on a consultancy business in the current year so paragraph 328-110(1)(a) of the ITAA 1997 is satisfied. The Trust's aggregated turnover is calculated under section 328-115 and section 328-120 of the ITAA 1997. Subsection 328-120(1) of the ITAA 1997 relevantly provides that the general rule is: 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. Section 328-115 of the ITAA 1997 provides that the Trust's aggregated turnover is as follows: (1) Your aggregated turnover for an income year is the sum of the relevant annual turnovers (see subsection (2)) excluding any amounts covered by subsection (3). Note: For small business CGT relief purposes, additional entities may be treated as being connected with you or your affiliate under sections 152-48 and 152-78. (2) The relevant annual turnovers are: (a) your annual turnover for the income year; and (b) the annual turnover for the income year of any entity (a relevant entity) that is connected with you at any time during the income year; and (c) the annual turnover for the income year of any entity (a relevant entity) that is an affiliate of yours at any time during the income year. (3) Your aggregated turnover for an income year does not include the following amounts: (a) amounts derived in the income year by you or a relevant entity from dealings between you and the relevant entity while the relevant entity is connected with you or is your affiliate; (b) amounts derived in the income year by a relevant entity from dealings between the relevant entity and another relevant entity while each relevant entity is connected with you or is your affiliate; (c) amounts derived in the income year by a relevant entity while the relevant entity is not connected with you and is not your affiliate. The Trust is controlled by A and B in terms of subsection 328-125(3) of the ITAA 1997 because they are the directors of the trustee of the Trust (being C), and the trustee acts in accordance with their wishes. Other entities controlled directly or indirectly by A and B, or otherwise connected with the Trust, are: (a) An Offshore Trust, which holds shares in an offshore entity, which holds an investment property and cash but does not conduct a business; (b) H and its subsidiaries; and (c) C, the trustee of the Trust. The annual turnover of D is not included in the aggregated turnover of the Trust, because D is not a connected entity of the Trust - the Trust owns less than 40% of the shares on issue in D under paragraph 328-125(2)(b) of the ITAA 1997. For completeness, the Trust did not carry on a business in each of the two income years before the current year and subsection 328-110(3) is therefore not relevant. The aggregated turnover of the Trust is therefore: (a) The Business - $XXX,XXX (less whatever the Business derives from Consultancy Services to H because of paragraph 328-115(3)(a) of ITAA 1997; (b) H - $XX,XXX; (c) J -Nil; and (d) K - Nil. (e) L - Nil; and (f) C, annualised income from Business $XXX,XXX. Accordingly, the aggregated income of the Trust will be less than $2,000,000 and the Trust is, therefore, a CGT small business entity and a small business entity. | Summary: Yes, the shares satisfy the active asset test at the time of the CGT event under paragraph 152-10(1)(d) and section 152-35 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: One of the basic requirements for small business relief under section 152-10 of the ITAA 1997 is provided by paragraph 152-10(1)(d) which relevantly provides as follows: The CGT asset satisfies the active asset test (see section 152-35). Section 152-35 of the ITAA 1997 relevantly provides as follows: 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 ½ years during the period specified in subsection (2). 152-35(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.' D was registered XX XXXX 20AA, and the Trust became a shareholder on X XXXX 20AZ as per company and share extracts provided. At the date of the CGT Event, the Trust had been shareholder of D for a period of approximately XXX days. To qualify as an active asset, therefore, the shares must have satisfied the active asset test for at least half this period, or XXX days. Section 152-40, relevantly provides that in order to satisfy the Active Asset Test: 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. 152-40(2) Subsection 392-20(1) is disregarded in determining, for the purposes of subsection (1) of this section, whether an entity is carrying on a business. 152-40(3) A CGT asset is also an active asset at a given time if, at that time, you own it and: (a) it is either a share in a company that is an Australian resident at that time or an interest in a trust that is a resident trust for CGT purposes for the income year in which that time occurs; and (b) the total of: (i) the market values of the active assets of the company or trust; and (ii) the market value of any financial instruments of the company or trust that are inherently connected with a business that the company or trust carries on; and (iii) any cash of the company or trust that is inherently connected with such a business; is 80% or more of the market value of all the assets of the company or trust. 152-40(3A) A share in a company, or an interest in a trust, mentioned in paragraph (3)(a) is an active asset at a time (the later time) if: (a) the share or interest was an active asset at an earlier time; and (b) it is reasonable to conclude that the share or interest is still an active asset at the later time. Note: This ensures that the 80% test does not need to be applied on a day to day basis. 152-40(3B) A share in a company, or an interest in a trust, mentioned in paragraph (3)(a) is an active asset at a time if: (a) the share or interest fails to meet the requirements under subsection (3) at that time; and (b) the failure is of a temporary nature only. Note: If a share in a company or an interest in a trust is chosen as a replacement asset, this ensures that a temporary failure of the 80% test does not automatically lead to CGT event J2 happening. Exceptions 152-40(4) However, the following CGT assets cannot be active assets: (a) interests in an entity that is connected with you, other than shares and interests covered by subsection (3); (b) shares in a company, other than: (i) shares in a widely held company that are covered by subsection (3), (3A) or (3B) and held by a CGT concession stakeholder of the company; and (ii) shares in any other company that are covered by subsection (3), (3A) or (3B); (c) interests in a trust, other than: (i) interests in a trust to which subsection (5) applies that are covered by subsection (3), (3A) or (3B) and held by a CGT concession stakeholder of the trust; and (ii) interests in any other trust that are covered by subsection (3), (3A) or (3B); (d) financial instruments (such as loans, debentures, bonds, promissory notes, futures contracts, forward contracts, currency swap contracts and a right or option in respect of a share, security, loan or contract); (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.' Given the CGT Event is happening to the shares in D, and subsection 152-40(1) of the ITAA 1997 is not satisfied as neither you, your affiliates or connected entities, used the asset in carrying on a business or was it inherently connected with carrying on a business in order to satisfy the requirements set out in subsection 152-35(2) of the ITAA 1997, then subsection 152-40(3) of the ITAA 1997 may be satisfied in order to meet the Active Asset Test. Australian resident company Under the statutory definition of 'Australian resident' contained in subsection 6(1) of the Income Tax Assessment Act 1936 , a company is resident in Australia if it is incorporated in Australia. D is incorporated in Australia and therefore an Australian resident and paragraph 152-40(3)(a) of the ITAA 1997 is satisfied. Satisfaction of 80% market value test D must also satisfy the 80% market value test contained in paragraph 152-40(3)(b) of the ITAA 1997 in order to satisfy the Active Asset Test. The assets of D as at the date of the CGT Event were provided and 100% of all assets were considered Active Assets. With reference to the table provided with your application and including Goodwill, inherently connected with the Company's business, it is considered that the 80% Active Asset Test will be satisfied. Period of ownership D's balance sheet indicates that the active assets were held by D throughout at leastthe 20XX financial year. They were still owned at the date of the CGT Event. The period of ownership is, well in excess of the 50% required during the period as defined in subsection 152-35(2) of the ITAA 1997). The Trust therefore satisfies the Active Asset Test in respect of the shares in D at the time of the CGT event. | Summary: It is considered that the Trust satisfies all the additional conditions outlined in subsection 152-10(2) of the ITAA 1997 where the CGT event involves sale of shares in a company (other than in relation to the existence of a CGT concessional stakeholder in paragraph 152-10(2)(d) of the ITAA 1997, which is not addressed in this ruling). | Detailed Reasoning - Detailed reasoning: Subsection 152-10(2) of the ITAA 1997 outlines additional basic conditions which must be satisfied if the CGT asset is as share in a company. Subsection 152-10(2) provides as follows: 152-10(2) The following additional basic conditions must be satisfied if the CGT asset is a share in a company, or an interest in a trust, (the object entity): (a) the CGT asset would still satisfy the active asset test (see section 152- 35) if the assumptions in subsection (2A) were made; (b) (if you do not satisfy the maximum net asset value test (see section 152-15)--you are carrying on a business just before the CGT event; (c) either: (i) the object entity would be a CGT small business entity for the income year; or (ii) the object entity would satisfy the maximum net asset value test (see section 152-15); if the following assumptions were made: (iii) the only CGT assets or annual turnovers considered were those of the object entity, each affiliate of the object entity, and each entity controlled by the object entity in a way described in section 328- 125; (iv) each reference in section 328- 125 to 40% were a reference to 20%; (v) no determination under subsection 328-125(6) were in force; (d) just before the CGT event, either: (i) you are a CGT concession stakeholder in the object entity; or (ii) CGT concession stakeholders in the object entity together have a small business participation percentage in you of at least 90%. 152-10(2A) For the purposes of paragraph 2(a), in working out whether subsection 152-40(3) applies at a given time (the test time) assume that: (a) an asset of a company or trust is covered by neither: (i) subparagraph 152-40(3)(b)(ii) (about financial instruments); nor (ii) subparagraph 152-40(3)(b)(iii) (about cash); if the company or trust acquired that asset for a purpose that included assisting an entity to otherwise satisfy paragraph (2)(a) of this section; and (b) paragraph 152-40(3)(b) does not cover an asset that: (i) is a share in a company, or an interest in a trust, (the later entity); and (ii) is held at the test time by the object entity directly or indirectly (through one or more interposed entities); and (c) subparagraph 152-40(3)(b)(i) also covers each asset that: (i) is held at the test time by a later entity covered by subsection (2B); and (ii) is, for that later entity, an asset of a kind referred to in subparagraph 152-40(3)(b)(i), (ii) or (iii), as modified by paragraphs (a) and (b) of this subsection; and (d) subject to paragraph (b) of this subsection, all of the assets of the object entity at the test time included all of the assets of each later entity at the test time; and (e) for the purposes of paragraph 152-40(3)(b), the market value at the test time of an asset held by a later entity were the product of: (i) the asset's market value, apart from this paragraph, at the test time; and (ii) the object entity's small business participation percentage in the later entity at the test time. 152-10(2B) For the purposes of paragraph (2A)(c), this subsection covers a later entity if: (a) at the test time: (i) your small business participation percentage in the later entity is at least 20%; or (ii) you are a CGT concession stakeholder of the later entity; and (b) either: (i) the later entity would be a CGT small business entity for the income year that includes the test time; or (ii) the later entity would satisfy the maximum net asset value test (see section 152-15) for a notional CGT event taken to have happened at the test time; if the following assumptions were made: (iii) the only CGT assets or annual turnovers considered were those of the later entity and of the entities referred to in subparagraph (2)(c)(iii); (iv) each reference in section 328- 125 to 40% were a reference to 20%; (v) no determination under subsection 328-125(6) were in force. | Detailed Reasoning - Paragraph 152-10(2)(a) of the ITAA 1997: Cash and financial instruments of D were not acquired for a purpose that included assisting the Company to satisfy paragraph 152-10(2)(a) of the ITAA 1997 - they were acquired for working capital to enable D to have cash on hand necessary to operate the business (paragraph 152-10(2A)(a)). The Company does not own shares or interests in trusts - and so paragraphs 152-10(2A)(a) to (e) of the ITAA 1997 are not relevant. Paragraph 152-10(2)(a) of the ITAA 1997 is satisfied. | Detailed Reasoning - Paragraph 152-10(2)(b) of the ITAA 1997: The Trust does not satisfy the maximum net asset value test but was carrying on a business before the CGT event. Paragraph 152-10(2)(b) of the ITAA 1997 is satisfied. | Detailed Reasoning - Paragraph 152-10(2)(c) of the ITAA 1997: D is a CGT small business entity for the income year, because it is carrying on a business and its annual turnover is less than $2,000,000 (and was in the year ended 30 XXX 20XX), and D satisfies the maximum net asset value test, as its net assets are less than $6,000,000. D has no affiliates, or entities controlled by it. Paragraph 152-10(2)(c) of the ITAA 1997 is satisfied. | Detailed Reasoning - Paragraph 152-10(2)(d) of the ITAA 1997: The Commissioner is not asked to rule on whether A or B are CGT concessional stakeholders in D for the current year. Therefore, any conclusion on satisfaction of these additional conditions under subsection 152-10(2) of the ITAA 1997 is subject to this limitation.