Private ruling: 15-year exemption to disregard the capital gain tax
Date of advice: 17 February 2026
Published: 7 April 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to apply 15-year exemption in section 152-105 of the Income Tax Assessment Act 1997 (ITAA 1997) to disregard the capital gain made on the disposal of the property? | A1: Yes.

Relevant facts and circumstances: 1. Property Purchases and Location • In 20XX, you and your spouse at the time purchased two adjacent rural properties located at XXXXXXX XXXXXX, XXX: ­ Property 1 (XXXX XXXX Road) - approximately 100 acres. ­ Property 2 (XXXX Road) - approximately 136 acres. • The two properties were separated by XXXX XXXX Road and XXXX Road, with portions of each property positioned on either side of these roads. 2. Business Structure and Use of Properties (20XX-20XX) • From 20XX to 20XX, the farming activity was carried on as a partnership between you and your former spouse. • Both properties were operated as a single farming enterprise, primarily cattle grazing. • The principal residence was on XXXX XXXX Road. • XXXX XXXX Road contained farming infrastructure (house, shedding, stock yards). • XXXX Road had only paddock fencing. 3. Construction of New House and Relocation (20XX) • In 20XX, a new dwelling was built on XXXX Road. • You and your former spouse relocated to the new XXXX Road home, which then became the primary residence and mailing address. • Farming operations continued across both properties. 4. Rental of XXXX XXXX Road Dwelling • After relocation in 20XX, the XXXX XXXX Road house was rented to a work colleague. • You continued to: ­ use the sheds and stock yards on XXXX XXXX Road ­ maintain the dwelling ­ use the land as part of the broader farming enterprise 5. Separation and Property Settlement (20XX) • You and your former spouse separated in 20XX. • As per Family Court consent orders, ownership of the XXXX XXXX Road property was transferred solely to you. • Your former spouse received the XXXX Road property. • Your former spouse contacted the ATO and was advised they had no CGT liability as a result of the transfer. 6. Sole Ownership and Business Activities (20XX-20XX) • From 20XX, the business was operated by you as a sole trader. • You moved back into the XXXX XXXX Road house. • Cattle farming continued and organic garlic was produced for approximately XXXX years. • During this period, you typically worked around 50 hours per week on the farm. You also worked 24 hours per week as a medical nurse at a health care facility to supplement your income. • Your net asset value is less than $6 million. • The turnover for your sole trader activities in the 20XX financial year was $XX,XXX. • Your ceased farming operations upon the sale of the property. 7. Sale of the XXXX XXXX Road Property (20XX) • The property was sold in November 20XX. • After the sale, you rented the dwelling for three months before relocating. • The sale proceeds were used to: ­ pay out the mortgage ­ purchase a villa in XXXXXXX ­ contribute $XXX,XXX to superannuation ­ undertake renovations ­ At the time of sale, you were XX years old and had reduced work to 20 hours per week in preparation for retirement.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 152-105 | Income Tax Assessment Act 1997 section 152-45 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 Division 152 | Income Tax Assessment Act 1997 Division 126-A

Reasons for decision: Summary: To be eligible for any of the CGT concessions, you must first meet the basic eligibility conditions. • a CGT event happens in relation to a CGT asset of yours in an income year. • the even would (apart from Division 152 of the ITAA 1997) have resulted in the gain. • at least one of the following applies: ­ you are a small business entity for the income year. ­ you satisfy the maximum net asset value test. ­ 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. ­ 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. (a) the CGT asset satisfies the active asset test. All the concessions, except for the small business 50% active asset reduction, have additional requirements you must meet. Active asset test An asset passes the active asset test if it has been an active asset of yours for at least: • 7.5 years during the test period (if you've owned it for more than 15 years). • half of the test period (if you've owned it for 15 years or less). The test period begins when you acquired the asset and ends at whichever occurs first: • the capital gains tax (CGT) event relating to the asset. • the business ceases or is sold, if the CGT even occurred 12 months or less after this. Application to the current facts • 20XX to 20XX - the property was used in a partnership carrying on cattle operations, with the XXXX XXXX Road land containing the sheds and stock yards integral to the business activities. • 20XX to 20XX - although the dwelling was rented to a third party, the land itself and the farming infrastructure continued to be used exclusively within the cattle enterprise, maintaining its active asset status. • 20XX to 20XX - the business continued as a sole trader operation, expanding to include organic garlic production for six years, in addition to cattle. The business ceased only on the sale of the property. The 20XX farm turnover of $XX,XXX demonstrates ongoing business trading activities and confirms the property was not a passive investment asset. Given the continuous and substantial business use of the property across approximately XX years, the property clearly exceeds the required 7.5-year active use threshold. Under subsection 152-45(2) of the ITAA 1997, if you are an individual, you can choose to disregard all or part of a capital gain if: (a) you had acquired the asset when the transferor acquired the asset; and (b) the asset had been an active asset of yours at all times when the asset was an active asset of the transferor; and (c) the asset had not been an active asset of yours at all times when the asset was not an active asset of the transferor. 15-year exemption Under section 152-105 of the ITAA 1997 if you are an individual, you can choose to disregard all or part of a capital gain if: • the basic conditions are satisfied • you continuously owned the CGT asset for the 15-year period ending just before the CGT even and • you are 55 or over at the time of the CGT event and the event happens in connection with your retirement. Marriage or relationship breakdowns If you mad the choice mentioned in subsection 152-45(2) of the ITAA 1997 for a CGT asset, then the period of continuous ownership applies as if you had acquired the asset when the transferor acquired it. Application to your circumstances You acquired the property with your spouse in 20XX and under Family Court consent orders in 20XX, the title was transferred solely to you. That transfer enables you to include your former spouse's earlier holding period for the 15-year test, giving you continuous ownership from 20XX through to the sale in November 20XX. You were XX at the time of the event, had substantially scaled back your work, and ceased your business activities upon disposal, so the sale occurred in connection with retirement. On that basis, Section 152-105 of the ITAA 1997 applies to disregard the capital gain in full. | Detailed Reasoning - Further issues to consider: In your request for advice, you made reference to the '6-year rule' which is relevant if you need to determine your eligibility for the main residence exemptions. However, in this case we have determined you are eligible to disregard the entire capital gain made on the sale of the XXXX XXXX Road property under the 15-year exemption. Therefore, there is no need to consider any other exemptions or concessions.