Private ruling: CGT - small business concessions
Date of advice: 29 April 2024
Published: 11 June 2024
Ruling period: 1 July XXXX to 30 June XXXX

Ruling: Q1: Has the activity of the Unit Trust in relation to the Property amounted to the conduct of business for purposes of Division 152 Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. | Q2: Was the Property an active asset of the Unit Trust for purposes of Subdivision 152-A ITAA 1997 during the period it was owned by the Trustee for the Unit Trust? | A2: Yes. | Q3: ls the small business 50% reduction allowed under Subdivision 152-C ITAA 1997 in working out the capital gain of the Unit Trust in relation to sale of the Property? | A3: Yes. | Q4: Is the Trustee for the Unit Trust eligible to choose to apply the small business retirement exemption in Subdivision 152-D of the ITAA 1997 to the capital gain it makes on the disposal of Property? | A4: Yes - to the extent all of the other relevant requirements in Subdivision 152-D of the ITAA 1997 are met. The Taxpayer is eligible to choose to disregard the amount that can be paid to any CGT concession stakeholder.

Relevant facts and circumstances: The Trustee for the Unit Trust acquired the Property under contract dated XXXX. The Property at the date of purchase X residential cottages equipped and maintained as traveller accommodation with a central entertainment area and restaurant, host residential accommodation and related infrastructure buildings etc. The contract of purchase included plant and equipment for the conduct of business including restaurant, accommodation, entertainment, grounds and property maintenance, water storage and reticulation. Specific items include: The Trustee for the Unit Trust conducted the cottages accommodation business (accommodation business) from the date of purchase installing a new accommodation booking system, designated business phone, eftpos facilities and website. The accommodation business was conducted on a systematic basis, offering short term accommodation stays to the public. Individual A and Individual B conducted the day-to-day management of the accommodation business. Their responsibilities have included: With the onset of COVID, and imposition of restrictions, the accommodation business was prevented from accepting overnight stays as previously. The business format was changed to medium term stays to cater for locums within the medical industry and other essential workers that needed this form of accommodation over the restricted period. The responsibilities listed in above continued - the only change was the frequency of guest change over. The change to the business model that was imposed by COVID restrictions was sustained until the Trustee for the Unit Trust determined to dispose of the accommodation business. Revenue from the Property: The ownership interests held through the Unit Trust were established prior to the purchase of the Property and were not altered during the period of property ownership by the Trustee for the Unit Trust. The ownership interests have been as follows: Table 1: The ownership interests have been as follows: Unit holder: Units - $1/unit % A Trust X 25 B SMSF X 25 Discretionary Trust X 25 C SMSF X 21 D Trust X 4 With the following exception, all entities are unrelated and have acted at arm's length. The entities C SMSF and D Trust are related to each other, for relevant purposes. Under the terms of the trust deed for the Unit Trust, all beneficiaries have an entitlement to all of the income and capital of the trust, including any accumulated income or capital, in proportion to their unitholdings. The Trustee for the Unit Trust sold the Property by contract entered into in XXXX. The sale of the Property gave rise to a capital gain for the purposes of Parts 3-1 and 3-3 of the ITAA 1997. The Trustee for the Unit Trust will make the choice to apply retirement exemption in Subdivision 152-D of the ITAA 1997. The aggregated turnover of the Unit Trust for the year ended 30 June XXXX was less than $X million. In working out the aggregated turnover of the Unit Trust, no account has been included of the annual turnover of any unitholder in the Unit Trust, because: o No unitholder (either with its affiliates or through any affiliates) has an interest in the Unit Trust which carries an interest in any distribution of the income or the capital of the Unit Trust greater than 25%. o No unitholder controls the Unit Trust. o There is no third entity which controls both the Unit Trust and any unitholder. Individual A and Individual B control the entity which is Discretionary Trust, in that they act jointly as trustees of that entity. A distribution resolution was in place at 30 June XXXX establishing present entitlement of at least 80% of income and capital of Discretionary Trust in one of the individuals who is an object of Discretionary Trust (Individual C).

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 subsection 152-305 | Income Tax Assessment Act 1997 section 328-110

Reasons for decision: Summary: The basic conditions in Subdivision 152-A of the ITAA 1997 are satisfied with respect to the sale of the Property. As the basic conditions in Subdivision 152-A are satisfied with respect to the sale of Property, the small business 50% discount under Subdivision 152-C of the ITAA 1997 will apply unless a choice is made not to apply it, as the 15-year exemption under Subdivision 152-B of the ITAA 1997 does not apply. The basic conditions, the significant individual test, and the company or trust conditions in relation the timing of the payment to the capital gains tax (CGT) concession stakeholder will be satisfied for the purposes of Subdivision 152-D of the ITAA 1997. As such, the Taxpayer is eligible to choose to disregard the amount that can be paid to any CGT concession stakeholder where they satisfy all of the other relevant conditions of Subdivision 152-D. The Taxpayer may choose not to apply the small business 50% reduction under Subdivision 152-C of the ITAA 1997 prior to applying the small business retirement exemption. | Detailed Reasoning - Subdivision 152-A of the ITAA 1997: Subsection 152-10(1) of the ITAA 1997 sets out the basic conditions. A *capital gain (except a capital gain from *CGT event K7) you make may be reduced or disregarded under this Division if the following basic conditions are satisfied for the gain: (a) a *CGT event happens in relation to a *CGT asset of yours in an income year; Note: This condition does not apply in the case of CGT event D1: see section 152-12. (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 (see section 152-15 ); (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 satisfies the active asset test (see section 152-35). The following requirements are relevant in these circumstances. | Detailed Reasoning - CGT event giving rise to a capital gain: Section 102-20 of the ITAA 1997 provides that a capital gain or capital loss is made if a CGT event happens to a CGT asset. Relevantly, under subsection 104-10(1) of the ITAA 1997, CGT event A1 happens if you dispose of a CGT asset. Under subsection 104-10(2) of the ITAA 1997, you dispose of a CGT asset when a change of ownership occurs from you to another entity. The effect of CGT event A1 happening is that you make a capital gain if the capital proceeds from the disposal are more than the asset's costs base or a capital loss if those capital proceeds are less than the asset's reduced cost base (subsection 104-10(5) of the ITAA 1997). The time of the event is when you enter into the contract for the disposal, or, if there is no contract, when the change occurs (subsection 104-10(3) of the ITAA 1997). | Detailed Reasoning - Small business entity: Pursuant to subsection 152-10(1AA) of the ITAA 1997, 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 to $10 million were a reference to $2 million. As defined in section 995-1 of the ITAA 1997, a small business entity has the meaning given in Subdivision 328-C of the ITAA 1997 - subject to the winding up exception under subsection 328-110(5), the entity must: o the entity carried on a business in the income year (the previous year) before the current year and the entity's *aggregated turnover for the previous year was less than $10 million (subparagraph 328-110(1)(b)(i) of the ITAA 1997); o the entity's aggregated turnover for the current year is likely to be less than $10 million provided the turnover when the business was carried on in both of the 2 previous years was not $10 million or more (subparagraph 328-110(1)(b)(ii) and subsection 328-110(3) of the ITAA 1997); or o the aggregated turnover of the entity for the current year (worked out as at the end of that year) is less than $10 million (subsection 328-110(4) of the ITAA 1997). Pursuant to subsection 328-110(5) of the ITAA 1997 an entity is a small business entity if: a) the entity is winding up a business it formerly carried on; and b) it was a small business entity in the income year that it stopped carrying on the business. | Detailed Reasoning - Carrying on a business: Section 995-1 of the ITAA 1997 defines 'business' as 'including any profession, trade, employment, vocation or calling, but not occupation as an employee'. Taxation Ruling TR 97/11 Income Tax: am I carrying on a business of primary production? (TR 97/11) provides the Commissioners view of the factors used to determine if a taxpayer is in business for tax purposes. Its principles are not restricted to questions of whether a primary production business is being carried on. In the Commissioner's view, the factors that are considered important in determining the question of business activity are: • whether the activity has a significant commercial purpose or character • whether the taxpayer has more than just an intention to engage in business • whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity • whether there is regularity and repetition of the activity • whether the activity is of the same kind and carried on in a similar manner to that of ordinary trade in that line of business • whether the activity is planned, organised and carried on in a businesslike manner such that it is described as making a profit • the size, scale and permanency of the activity, and • whether the activity is better described as a hobby, a form of recreation or sporting activity. These factors are framed in TR 97/11 to reflect that the alternate outcome is as described in the final dot point. TR 97/11 states the indicators must be considered in combination and as a whole and whether a business is being carried on depends on the 'large or general impression gained' ( Martin v. FC of T (1953) 90 CLR 470 at 474; 5 AITR 548 at 551) from looking at all the indicators, and whether these factors provide the operations with a 'commercial flavour' ( Ferguson v. FC of T (1979) 37 FLR 310 at 325; 79 ATC 4261 at 4271; (1979) 9 ATR 873 at 884). However, the weighting to be given to each indicator may vary from case to case. Taxation Ruling TR 2019/1 Income tax: when does a company carry on a business? sets out the principles to determine whether a company is carrying on a business for the purposes of section 328-110 of the ITAA 1997. Relevantly, it explains that the case law highlights that the differences between companies, individuals (including individuals in a partnership) and trusts influence the characterisation of the activities they carry on. These differences mean that the same activities carried on by companies are more likely to have a commercial character and amount to the carrying on of a business than if they were carried out by either an individual or trust. Relevantly, the mere derivation of rental income from property is unlikely to constitute carrying on a business for income tax purposes. Paragraph 8 of Taxation Ruling TR 2003/4 Income tax: boat hire arrangements (which is about whether boat charter activities generate business or investment income) states: The receipt of income from the lease of an asset does not of itself amount to the carrying on of a business (see FC of T v. McDonald 87 ATC 4541; (1987) 18 ATR 957), but instead would generally be the passive receipt of income from property. Paragraph 51 of Taxation Ruling TR 2003/4 states: ... Beaumont J indicated (quoting Wertman v. Minister of National Revenue 64 DTC 5158) that for a business to be carried on by owners of property, one would expect that they would be involved in providing services in addition to the process of letting property (as with a boarding house), not merely receiving payments for the tenants' occupation of the property. | Detailed Reasoning - Active asset test: Under subsection 152-35(1) of the ITAA 1997, a CGT asset will satisfy 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 test period, 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 7½ years during the test period. Under subsection 152-35(2) of the of the ITAA 1997 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. Subsection 152-40(1) of the ITAA 1997 provides that a CGT asset is an active asset at a time if, at that time you own the asset and it is used, or held ready for use, in the course of carrying on a business that is carried on by you, or your affiliate, or another entity that is connected with you. | Detailed Reasoning - Nature of asset: For a CGT asset of a business to be an active asset for the purposes of Division 152 of the ITAA 1997 it must firstly satisfy one of the 'positive tests' in subsection 152-40(1) of the ITAA 1997 and then also not be excluded by one of the exceptions in subsection 152-40(4) of the ITAA 1997. Under paragraph 152-40(1)(a) of the ITAA 1997 a CGT asset is an active asset (subject to the exclusions) if it is owned and used, or held ready for use, in the course of carrying on a business. However, paragraph 152-40(4)(e) of the ITAA 1997 provides that an asset whose main use in the course of carrying on the business is to derive rent cannot be an active asset (unless that main use was only temporary). That is, even if the asset is used in a business, it will not be an active asset if its main use is to derive rent. In TD 2006/78 ( Income tax: capital gains: are there any circumstances in which the premises used in a business of providing accommodation for reward may satisfy the active asset test in section 152-35 of the Income Tax Assessment Act 1997 notwithstanding the exclusion in paragraph 152-40(4)(e) of the Income Tax Assessment Act 1997 for assets whose main use is to derive rent?) the Commissioner explains the circumstances in which it is considered that the asset's main use is to derive rent. The term 'rent' has been described as follows: Whether an asset's main use is to derive rent will depend on the particular circumstances of each case. A key factor therefore in determining whether an occupant of premises is a lessee is whether the occupier has a right to exclusive possession ( Radaich v. Smith (1959) 101 CLR 209; Tingari Village North Pty Ltd v. Commissioner of Taxation [2010] AATA 233 at paragraphs 44-46, 2010 ATC 10-131, 78 ATR 693). Where premises are leased to a tenant under a lease agreement granting exclusive possession, the payments involved are likely to be rent and the premises not an active asset. On the other hand, if the arrangement allows the person only to enter and use the premises for certain purposes and does not amount to a lease granting exclusive possession, the payments involved are unlikely to be rent. Relevant factors to consider (in addition to whether the occupier has a right to exclusive possession) include the degree of control retained by the owner and the extent of any services provided by the owner ( Allen v. Aller (1966) 1 NSWR 572), Appah v. Parncliffe Investments Ltd [1964] 1 All ER 838 and Marchant v. Charters [1977] 3 All ER 918). Relevantly, the Commissioner explains that holiday apartments are not excluded by paragraph 152-40(4)(e) of the ITAA 1997 and is therefore an active asset in the following circumstances: | Detailed Reasoning - Example 4: holiday apartments: 11. Linda owns a complex of 6 holiday apartments. The apartments are advertised collectively as a motel and are booked for periods ranging from 1 night to 1 month. The majority of bookings are from 1 to 7 nights . 12. Linda is responsible for bookings, checking guests in and out and cleaning the apartments. She also provides clean linen and meal facilities to guests. Linda does not enter into any lease agreements with guests staying at the apartments . 13. In this example, the apartments are operated similar to a motel. The guests do not have exclusive possession of the apartment they are staying in but rather only a right to occupy the apartment on certain conditions. The usual length of stay by guests is very short term and room cleaning, linen and meals are also provided to guests . 14. These facts indicate that the relationship between Linda and the guests is not that of landlord/tenant under a lease agreement. Accordingly, the income derived is not 'rent'. If Linda's activities amount to the carrying on of a business, the paragraph 152-40(4)(e) of the ITAA 1997 exclusion would not apply and the apartments would be active assets under section 152-40 of the ITAA 1997 . | Detailed Reasoning - Small business 50% reduction: Pursuant to section 152-205 of the ITAA 1997, the amount of a capital gain remaining after applying step 3 of the method statement in subsection 102-5(1) is reduced by 50% if the basic conditions in Subdivision 152-A are satisfied for the gain. However, you may choose not to apply the reduction mentioned in section 152-205 of the ITAA 1997 to a particular capital gain (section 152-220). The small business 50% reduction will not apply to a capital gain to which the 15-year exemption applies (section 152-215 of the ITAA 1997). | Detailed Reasoning - Subdivision 152-D of the ITAA 1997: Relevantly, subsection 152-305(2) of the ITAA 1997 sets out the following requirements: | Detailed Reasoning - Company or trust: 152-305(2) A company or a trust (except a public entity - see subsection (3)) can also choose to disregard such an amount if: (a) the basic conditions in Subdivision 152-A are satisfied for the *capital gain; and (b) the entity satisfies the significant individual test (see section 152-50); and (c) the company or trust conditions in section 152-325 are satisfied. Note: Section 103-25 tells you when the choice must be made. | Detailed Reasoning - Basic conditions: Refer to the discussion above. | Detailed Reasoning - Significant individual: Section 152-55 of the ITAA 1997 sets out the meaning of significant individual: an individual is a significant individual in a company or a trust at a time if, at that time, the individual has a *small business participation percentage in a company or trust of at least 20%. Section 152-65 of the ITAA 1997 provides that an entity's small business participation percentage in another entity at a time is the percentage that is the sum of: a) the entity's *direct small business participation percentage in the other entity at that time; and b) the entity's *indirect small business participation percentage in the other entity at that time. Section 152-70 of the ITAA 1997 provides that an entity holds a direct small business participation percentage at the relevant time in an entity equal to the percentage worked out using this table: Table 2: Section 152-70 of the ITAA 1997 provides that an entity holds a direct small business participation percentage at the relevant time in an entity equal to the percentage worked out using this table: | Detailed Reasoning - Is:: 1 A company This percentage that the entity has because of holding the legal and equitable interests in *shares in the company: (a) the percentage of the voting power in the company; or (b) the percentage of any *dividend that the company may pay; or (c) the percentage of any distribution of capital that the company may make; or, if they are different, the smaller or smallest. 2 A trust (where entities have entitlements to all the income and capital of the trust) This percentage: (a) the percentage of any distribution of income that the trustee may make to which the entity would be beneficially entitled; or (b) the percentage of any distribution of capital that the trustee may make to which the entity would be beneficially entitled; or, if they are different, the smaller. 3 A trust (where entities do not have entitlements to all the income and capital of the trust) This percentage: (a) if the trustee makes distributions of income during the income year (the relevant year ) in which that time occurs - the percentage of the distributions to which the entity was beneficially entitled; or (b) if the trustee makes distributions of capital during the relevant year - the percentage of the distributions to which the entity was beneficially entitled; or, if 2 different percentages are applicable, the smaller Relevantly, for the purposes of section 152-70 of the ITAA 1997, for a trust, where entities have entitlements to all the income and capital of the trust (fixed trust), an entity's direct small business participation percentage is the percentage of the income and capital of the trust that the entity is beneficially entitled to receive. An entity's direct small business participation percentage in a trust, where entities do not have entitlements to all the income and capital of the trust (discretionary trust), if the trust made a distribution of income or capital, is the percentage of distributions of income and capital that the entity is beneficially entitled to during the income year. If the trust did not make a distribution of income or capital during the income year it will not have a significant individual during that income year (see paragraphs 1.14 and 1.15 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No 7) Bill 2006 (Explanatory Memorandum)). For the purposes of section 152-75 of the ITAA 1997, an entity's indirect small business participation percentage in a company or trust is calculated by multiplying together the entity's direct participation percentage in an interposed entity, and the interposed entity's total participation percentage (both direct and indirect) in the company or trust (see paragraph 1.17 of the Explanatory Memorandum). The following example in the Explanatory Memorandum illustrates the application of these rules: | Detailed Reasoning - Example 2: Discretionary Trust owns 100% of the shares in Operating Company. Therefore, Discretionary Trust has a 100% direct interest (and no indirect interest) in Operating Company. Annie receives 80% of the distributions from Discretionary Trust. Therefore, she has a direct SBPP of 80% in it. To find Annie's SBPP in Operating Company, multiply together Annie's direct SBPP in Discretionary Trust and Discretionary Trust's total SBPP in Operating Company as follows: 80% × 100% = 80%. Therefore, Annie has an 80% SBPP in Operating Company and is a significant individual of it (and CGT concession stakeholder). Where an entity in the chain is a trust, it necessary to consider the individual's entitlement to income and capital. ATO Interpretative Decision ATO ID 2015/8 Income tax: CGT small business concessions: small business participation percentage - trust where entities have entitlement to all income and capital of the trust explains the Commissioner's approach to determining entitlement to trust income and capital for the purposes of determining an individual's small business participation percentage (as set out below). Although 'income' is not relevantly defined, in context, it has the meaning which it has for the purposes of the general law of trusts (see e.g. ATO Interpretative Decision ATO ID 2012/99 Income Tax Capital gains tax - direct small business participation percentage in a trust - meaning of 'distributions of income' and capital ). Similarly, it is considered that 'capital' has the meaning which it has for the purposes of the general law of trusts. Accordingly, a determination of whether a trust is an entity to which item 2 or item 3 of the table in subsection 152-70(1) of the ITAA 1997 applies, depends on whether or not, on a proper construction of the trust instrument, there is any amount of income or capital of the trust to which no beneficiary is entitled at the relevant time. The 'relevant time' (as that phrase is used in subsection 152-70(1) of the ITAA 1997) for making the determination is, with respect to the additional basic conditions, 'just before the CGT event' (subsection 152-10(2) of the ITAA 1997). Accordingly, a trust instrument which gives the trustee discretion to appoint or distribute income or capital to one or more of a class of beneficiaries is a trust where entities do not have entitlements to all the income and capital of the trust. Although entities may become entitled to the income and capital of the trust as a result of the exercise of the trustee's discretion, those entitlements do not exist prior to that time. Whilst every case will turn on a proper construction of the trust instrument, the power in the trustee to accumulate income of the trust may not of itself cause the trust to be one in which beneficiaries do not have entitlements to all the income and capital of the trust. Generally, an accumulation clause gives the trustee a power to effectively cause part of the income of the trust estate to be capital of the trust estate. Provided that, under the trust instrument, one or more beneficiaries has, at the relevant time, an entitlement to all of the income and capital of the trust, including any accumulated income or capital, the trust will be a trust to which item 2 of the table in subsection 152-70(1) of the ITAA 1997 applies. For the purposes of determining whether or not a trust is a trust to which item 2 or item 3 of the table in subsection 152-70(1) applies, it does not matter whether the same beneficiary or beneficiaries have an entitlement to the accumulated income or capital. It is noted that a significant individual is a CGT concession stakeholder of the company or trust for the purposes of section 152-60 of the ITAA 1997. | Detailed Reasoning - Trust conditions: In broad terms, section 152-325 of the ITAA 1997 provides that a company or trust must further satisfy the following conditions in order to be eligible to disregard all or part of a capital gain: Where the choice relates to disregarding a capital gain other than from CGT events J2, J5 or J6, you must make payments if you choose the retirement exemption for an event 7 days after you choose to disregard the capital gain or 7 days after you receive the capital proceeds from the CGT event. There are other conditions that must be satisfied, including the following: | Detailed Reasoning - Application in these circumstances: Relevantly in this case: • The basic conditions for relief in Subdivision 152-A of the ITAA 1997 are satisfied as follows. The arrangements entered into with the occupants of the cottages indicate that the occupants do not have the right to exclusive possession of the cottages, but rather only the right to enter and use the cottages for certain purposes for a relatively short period (noting the impact of COVID on the business format for a period of time prior to the sale of the business). This right is unassignable. There is also no indication of any intention to grant a lease. Other services are provided to the occupants of the cottages. In the circumstances it is considered that a tenant/landlord relationship does not exist between the parties and therefore the amounts received are not rent. Accordingly, the BHPD Unit Trust is considered to have been carrying on an accommodation business. The Property is used in the course of the Unit Trust's business of providing accommodation for purposes of subsection 152-40(1) of the ITAA 1997. • The conditions for relief in Subdivision 152-C of the ITAA 1997 are satisfied. As the basic conditions in Subdivision 152-A are satisfied with respect to the sale of Property, the small business 50% discount will apply unless a choice is made not to apply it, as the 15-year exemption under Subdivision 152-B of the ITAA 1997 does not apply. • The conditions for relief in Subdivision 152-D of the ITAA 1997 are satisfied as follows. The power in the trustee to accumulate some or all of the income of the trust estate in accordance with the terms of the trust deed does not change the fact that the unitholders are, at all relevant times, entitled to all of the income and capital of the Unit Trust. The Trustee for Discretionary Trust is entitled to 25% of the income and capital of the Unit Trust just before the CGT event. The Trustee for Discretionary Trust resolved to distribute at least 80% of the income and capital of the trust to Individual C in the relevant income year. Therefore, Individual's small business participation percentage in the Unit Trust is determined by multiplying together Individual C's direct small business participation percentage in Discretionary Trust and Discretionary Trust's total small business participation percentage in the Unit Trust - 80% × 25% = 20%. Therefore, Individual C has a 20% small business participation percentage in the Unit Trust and is a significant individual of it for the purposes of Subdivision 152-D of the ITAA 1997. It is noted that Individual C is also a CGT concession stakeholder of the Unit Trust for the purposes of section 152-60 of the ITAA 1997. Payment of the relevant amount will be made to the Individual no later than 7 days after the Trustee of the Unit Trust makes the choice to apply the small business retirement exemption, by way of lodging its tax return for the income year ended 30 June XXXX. | Detailed Reasoning - Conclusion: Consequently, if all of the other requirements of Subdivision 152-D of the ITAA 1997 are met, the Taxpayers may choose to disregard the amount that can be paid to any CGT concession stakeholder.

Airconditioning and heating units. | Blinds, curtains and carpets. | Fire control and alarm systems, hoses and extinguishers. | Kitchen equipment: microwave ovens, refrigerators and upright stoves. | Laundry plant: washers and drying equipment. | Setting accommodation prices. | Handling bookings that came via phone, website or booking agency. | Checking in guests, receive payments, liaise with guests. | All gardening and general maintenance Managing laundry and general consumables. | The revenue from managing the cottages as short to medium - term accommodation (cottage income). | Income from tenants of the host residential accommodation (house income). | Income received from third parties for use of the restaurant and related facilities (restaurant income). | No unitholder in the Unit Trust is connected with the Unit Trust for the purposes of Division 152 of the ITAA 1997 because: | No unitholder is an affiliate of the Unit Trust for the purposes of Division 152 of the ITAA 1997. | be carrying on a business; and | satisfy any 1 of 3 tests based on turnover: | the amount payable by a tenant to a landlord for the use of the leased premises ( C.H. Bailey Ltd v. Memorial Enterprises Ltd [1974] 1 All ER 1003 at 1010, United Scientific Holdings Ltd v. Burnley Borough Council [1977] 2 All ER 62 at 76, 86, 93, 99); | a tenant's periodical payment to an owner or landlord for the use of land or premises ( The Australian Oxford Dictionary , 1999, Oxford University Press, Melbourne); and | recompense paid by the tenant to the landlord for the exclusive possession of corporeal hereditaments. ....... The modern conception of rent is a payment which a tenant is bound by contract to make to his landlord for the use of the property let (Halsbury's Laws of England 4th Edition Reissue, Butterworths, London 1994, Vol 27(1) 'Landlord and Tenant', paragraph 212). | you keep a written record of the amount you choose to disregard (the exempt amount) and, if there is more than one CGT concession stakeholder, each stakeholder's percentage of the exempt amount; | you make a payment to at least one of your CGT concession stakeholders worked out by reference to each individual's percentage of the exempt amount; | if the CGT concession stakeholder to whom the payment is made is an employee of the company or trust, the payment must not be of a kind mentioned in section 82-135 of the ITAA 1997 (disregarding paragraph (fa) of that section); | the payment is equal to the exempt amount or the amount of capital proceeds, whichever is less; and | where you receive the capital proceeds in instalments, you make a payment to a CGT concession stakeholder for each instalment in succession (up to the asset's CGT exempt amount). | For a company or trust, the CGT exempt amount must not exceed the CGT retirement exemption limit of each CGT concession stakeholder receiving a payment (paragraph 152-315(2)(b) of the ITAA 1997). | The CGT exempt amount must be specified in writing by the company or trust (subsection 152-315(4) of the ITAA 1997). If a company or trust is making the choice and it has more than one CGT concession stakeholders, it must specify in writing the percentage of each CGT asset's CGT exempt amount that is attributable to each of those stakeholders. One or more of the percentages may be nil, but the percentages must add up to 100% (subsection 152-315(5) of the ITAA 1997). | If the CGT concession stakeholder is an employee of the company or trust, the payment must not be a payment that is specifically stated in section 82-135 of the ITAA 1997, disregarding paragraph 82-135(fa) (subsection 152-325(3A) of the ITAA 1997). | If a CGT concession stakeholder is under 55 years old just before a payment is made in relation to them, the company or trust must make the payment to the CGT concession stakeholder by contributing it to a complying superannuation fund or retirement savings account (RSA) on their behalf. The company or trust must notify the trustee of the fund or RSA at the time of the contribution that the contribution is being made in accordance with the requirements of the retirement exemption. There is no requirement to make this contribution if the stakeholder was 55 years old or older. | The Property is a CGT asset for the purposes of section 108-5 of the ITAA 1997. The sale of the Property resulted in a capital gain for the purpose of CGT event A1. The conditions in paragraphs 152-10(1)(a) and 152-10(1)(b) of the ITAA 1997 are satisfied. | The Unit Trust is a CGT small business entity for the purposes of section 152-10(1AA) of the ITAA 1997 for the relevant income years. Having regard to the nature of the business activities as it relates to the accommodation business and the use of the Property (as discussed below), the Unit Trust was carrying on a business at the time of the CGT event for the purposes of section 328-110 of the ITAA 1997.The condition in subparagraph 152-10(1)(c)(i) of the ITAA 1997 is satisfied. | The Property satisfies the active asset test as it was used by the Trustee for the Unit Trust in carrying on its business for the period specified in subsection 152-35(2) of the ITAA 1997. The condition in paragraph 152-10(d) of the ITAA 1997 is satisfied. | The basic conditions for relief in Subdivision 152-A of the ITAA 1997 are satisfied as set out above. The condition in paragraph 152-205(2)(a) of the ITAA 1997 is satisfied. | Individual C is a significant individual for the purposes of section 152-50 of the ITAA 1997. The condition in paragraph 152-205(2)(b) of the ITAA 1997 is satisfied. | The following trust conditions in section 152-325 of the ITAA 1997 is met for the purposes of paragraph 152-205(2)(c) of the ITAA 1997.