Private ruling: small business concessions
Date of advice: 27 June 2025
Published: 1 September 2025
Ruling period: Year ending 20YY
Date scheme commenced: In the year ending 20XX

Ruling: Q1: Are the requirements of the 15-year exemption, pursuant to subdivision 152-B of the Income Tax Assessment Act 1997 (ITAA 1997) met such that Person 1 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of the Property B? | A1: Yes. | Q2: Are the requirements of the 15-year exemption, pursuant to subdivision 152-B of theITAA 1997 met such that Person 1 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of Property C? | A2: Yes. | Q3: Are the requirements of the 15-year exemption, pursuant to subdivision 152-B of the ITAA 1997 met such that Person 2 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of Property B? | A3: Yes | Q4: Are the requirements of the 15-year exemption, pursuant to subdivision 152-B of the ITAA 1997 met such that Person 2 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of Property C? | A4: Yes.

Relevant facts and circumstances: The taxpayers are spouses. Person 1, over 55 years old and Person 2 also over 55 years old. Person 1 and Person 2 are partners in a primary production partnership business operating under the name XX (Partnership). Person 1 and Person 2 have carried out their primary production business in the same location in Australia since the XXXXs. Person 1 and Person 2 have a Deed of Partnership for their Partnership, last updated on XX XXX XXXX Person 1 and Person 2 do not carry on any businesses in their own right. Properties In YYYY Person 1 and Person 2 purchased the property as joint tenants (Property A). Person 1 and Person 2 purchased Property A as their principal place of residence and as a location from which to operate their Partnership business. Property A has remained, and is currently, their principal place of residence. In YYYY Person 1 and Person 2 purchased the property located at XXX as joint tenants (Property B) which has been used by Person 1 and Person 2 as a premises to run their Partnership business from purchase. In YYYY Person 1 and Person 2 purchased the property located at XXX as joint tenants (Property C) for the purpose of furthering their primary production business. Property C has been used by Person 1 and Person 2 as a location to run their partnership business since YYYY. In YYYY Person 1 and Person 2 purchased Property D as joint tenants. In YYYY Person 1 and Person 2 purchased Property E as joint tenants. Property D and Property E were purchased for the purpose of furthering their primary production business and have been used by Person 1 and Person 2 as a location to run their Partnership business from since their respective purchase. Person 1 and Person 2, as joint tenants, allow the Partnership to use Property A, Property B, Property C, Property D and Property E to run their Partnership business from. They have not transferred or leased the properties to the Partnership, but have allowed the Partnership to utilise them, which the Partnership has done since their respective ownership of the properties. Person 1 and Person 2's retirement The properties used by Person 1 and Person 2's Partnership to operate their primary production business are all operated in conjunction with each other. Decisions are made at the required time about how the properties will be utilised and are based on many varying factors (e.g. the condition of the individual property, water, what the property is currently being used for, category, age and condition, weather conditions and the availability of workforce at the point of time). In recent years Person 1 has suffered from numerous health issues which has affected the way in which Person 1 and Person 2 operate their Partnership business. In YYYY Person 1 sustained a serious injury which left them unable to perform their typical work for the Partnership. Since their injury Person 1 has had to curtail some of the work they performs. Other health ailments have gradually affected their ability to do work. X year after Person 1's injury, the Partnership engaged a full-time manager to work and oversee the operations of Properties B, C, D and E, which are approximately XX kms away from property A. At the same time, the Partnership's expenditure has been greatly increased to engage casual contractors to carry out infrastructure works, maintenance and the physical work of the business. In the past Person 2 supported and assisted Person 1 with physical work. They perform most of the X work for the Partnership, engaging professionals as necessary. Despite their health issues, numerous medical professionals have advised Person 1 to remain as active as possible and to take an active interest in the business. Due to H's recent ill health and as part of their personal succession planning Person 1 and Person 2 intend to transfer Property B, Property C and Property D to their child (Person 3). The properties will be gifted to Person 3 for no financial consideration. When the properties are transferred to Person 3, Person 1 and Person 2 will cease the operation of their Partnership businesses at these three property locations. Appropriate actions will be taken to transfer or sell the stock on these properties. Equipment, machinery, and stock are not currently planned to be gifted or sold to Person 3. Person 1 and Person 2 will still hold Property A and Property E and plan to remain living at Property A for as long as their health allows. The transfer of three of the five properties Person 1 and Person 2 use to operate their Partnership business will signify a significant change in the way that Person 1 and Person 2 operate their business - it is a significant reduction in the size of their operation. Although while their health allows, Person 1 and Person 2 plan to continue to operate their Partnership for a period after the transfer of these properties to Person 3, it will be in a significantly reduced capacity (size of operation) and in their personal capacity to perform the work of the Partnership, where they will continue to rely increasingly on managers and contractors to operate the business and where they will act in more of a supervisory and advisory roles. It is expected that Person 1 and Person 2 will be performing the duties of the Partnership for less than X hours a week in the near future, where they previously have performed approximately YY hours each per week in the work of the Partnership. Turnover In the 20XX income year (the year before the current income year), the annual turnover of the Partnership in accordance with subsection 328-120(1) of the ITAA 1997 was less than $2 million. Person 1 and Person 2 have provided high level of detail explaining why the turnover was less in the 20XX year (weather conditions and industry specific circumstances outside of their control). Assumptions The current market value of the properties B and C are greater than their respective cost bases.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 102-5(1) | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 section 116-30 | Income Tax Assessment Act 1997 Subdivision 152-A | Income Tax Assessment Act 1997 Subdivision 152-B | Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-105 | Income Tax Assessment Act 1997 section 328-110 | Income Tax Assessment Act 1997 section 328-115 | Income Tax Assessment Act 1997 subsection 328-125(2) | Income Tax Assessment Act 1997 section 328-130 | Income Tax Assessment Act 1997 subsection 152-10(1) | Income Tax Assessment Act 1997 subsection 152-40(1)

Reasons for decision: Summary: Person 1 satisfies the small business basic conditions for relief contained in Subdivision 152-A and the specific conditions contained in section 152-105 and as such, the requirements of the 15-year exemption, pursuant to subdivision 152-B are met. This means that Person 1 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of Property B. | Detailed Reasoning - Small business capital gains tax concessions: To assist small businesses, Division 152 sets out four small business concessions which allow eligible taxpayers to disregard, reduce or defer certain capital gains tax obligations. To be eligible to apply the Division 152 concessions, the basic conditions for relief set out on Subdivision 152-A must be satisfied. Some of the concessions then have additional, specific conditions that must be satisfied. A capital gain that qualifies for the 15-year exemption in accordance with Subdivision 152-B is disregarded entirely and is not taken into account under the method statement in subsection 102-5(1). The other concessions are activated by step 4 of the method statement. | Detailed Reasoning - The basic conditions for relief: Subdivision 152-A sets out the basic conditions for relief that must be satisfied for an entity to be eligible to reduce its capital gains using the small business concessions as follows: 152-10(1) 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. (a) the event would (apart from this Division) have resulted in the gain; (b) 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). Note: This condition does not apply in the case of CGT event D1: see section 152-12. That is, a taxpayer will satisfy the basic conditions for relief where: • a CGT event happens in relation to a CGT asset of the taxpayer in an income year and the CGT event would (if not for Division 152) result in a gain, and • one of the conditions set out in paragraph 152-10(1)(c) applies, and • the CGT asset satisfies the active asset test. | Detailed Reasoning - CGT event A1 resulting in a gain: In accordance with section 108-5, both Property B and Property C are CGT assets. Where two or more individuals own a CGT asset jointly, CGT applies separately to each individual's interest in the asset. A capital gain or capital loss is made if a GCT event happens to a CGT asset (section 102-20 ITAA 1997), with CGT event A1 occurring when a taxpayer disposes of their ownership interest in a CGT asset (section 104-10 ITAA 1997). Thus, CGT event A1 will occur in relation to Person 1's and Person 2's interests in Property B and Property C when they dispose of their interest in those properties by transferring ownership to Person 3. A taxpayer makes a capital gain if the capital proceeds from the disposal are more than the asset's cost base (subsection 104-10(4)). Generally capital proceeds from a CGT event are the total of the money received (or entitled to receive) in respect of the event happening, and the market value of any other property the taxpayer received or is entitled to receive in respect of the event happening (subsection 116-20(1)). Where a taxpayer receives no capital proceeds from a CGT event, where some or all of the capital proceeds cannot be valued, or where the taxpayer did not deal at arm's length with another entity in connection with the event, for example, if the taxpayer gifts a CGT asset to another entity, the taxpayer is taken to have received the market value of the CGT asset that is the subject of the event (section 116-30). The market value of both Property B and Property C is assumed to be greater than their respective cost bases and therefore, if not for Division 152, the transfer of the properties to Person 3 would have resulted in a capital gain. Therefore, the basic conditions set out in subsection 152-10(1) will be met if at least one of the conditions in paragraph 152-10(1)(c) applies and the CGT asset satisfies the active asset test. | Detailed Reasoning - Paragraph 152-10(1)(c): As discussed above, the basic conditions require that for a capital gain to be reduced or disregarded under Division 152 at least one of the conditions set out in paragraph 152-10(1)(c) must apply. Subparagraph 152-10(1)(c)(iv) will apply where the conditions mentioned in subsection 152-10(1A) or 152-10(1B) are satisfied in relation to the CGT event in the income year. As Person 1 and Person 2 own the CGT assets and allow the assets to be used by the business that they run in partnership with each other, subsection 152-10(1B) is most relevant. Subsection 152-10(1B) states: 152-10(1B) (1B) The conditions in this subsection are satisfied in relation to the * CGT asset in the income year if: a. you are a partner in a partnership in the income year; and b. the partnership is a * CGT small business entity for the income year; and c. you do not carry on a * business in the income year (other than in partnership); and d. the CGT asset is not an interest in an asset of the partnership; and e. the business you carry on as a partner in the partnership referred to in paragraph (a) is the business that you, at a time in the income year, carry on (as referred to in subparagraph 152 - 40(1)(a)(i) or paragraph 152 - 40(1)(b)) in relation to the CGT asset. Person 1 and Person 2 are partners in the Partnership, and they do not carry on a business in the income year other than in the Partnership. The CGT assets, being Property B and Property C, are not interests in an asset of the Partnership. Therefore, the conditions in subsection 152-10(1B) will be met if the Partnership is a 'CGT small business entity' in the income year. 'CGT small business entity' is defined in subsection 152-10(1AA) as follows: 152-10(1AA) You are a CGT small business entity for an income year (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. Note: for the purposes of subsection (1A) or (1B), in determining whether an entity would be a small business entity, see also sections 152-48 and 152-78. That is, an entity is a 'CGT small business entity' for an income year if they would meet the definition of a 'small business entity' if the references to $10 million in that definition were replaced with references to $2 million (and considering any additional applicable requirements in sections 152-48 and 152-78). 'Small business entity' has the meaning given by section 328-110 which states: 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. ... Partners in a partnership 328-110(6) A person who is a partner in a partnership in an income year is not, in his or her capacity as a partner, a small business entity for the income year. Therefore, an entity will be a CGT small business entity for the current income year if: ­ the entity carries on a business in the current year, and ­ one or both of the following applies: o the entity carries on a business in the previous income year before the current year and the entity's aggregated turnover for the previous year was less than $2 million; o the entity's aggregated turnover for the current year is likely to be less than $2 million. The Partnership is carrying on a business in the current year and did so in the previous income year before the current year (that is, in the 20XX income year). Therefore, the partnership will be a CGT small business entity if its aggregated turnover for the 20XX year was less than $2 million and/or the Partnership's aggregated turnover for the current year is likely to be less than $2 million. 'Aggregated turnover' is a defined term in the Act and has the meaning given by section 328-115 which states: 328-115(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. 328-115(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. 328-115(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. That is, an entity's aggregated turnover for an income year is comprised of its own annual turnover, together with the annual turnover of any entity that is 'connected with' it, or is an 'affiliate' of it at any time during the income year. Both an individual and a partnership are an 'entity' (subsection 960-100(1)). 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 (subsection 328-120(1)). The annual turnover for the Partnership in the previous year (20XX income year) was less than $2 million. Therefore, the Partnership will be a CGT small business entity in accordance with subparagraph 328-110(1)(b)(i), if the Partnership has no entities that are connected with the Partnership or affiliates of the Partnership (or, if any entities are connected with or affiliates of the Partnership, the annual turnovers of these entities combined with the Partnership's turnover, is less than $2 million). Subsection 328-125(1) states: An entity is connected with another entity if: (a) either controls the other entity in a way described in this section; (b) both entities are controlled in a way described in this section by the same third entity. Taxation Determination TD 2022/7 Income tax: aggregated turnover - application of the 'connected with' concept to partnerships, foreign hybrids and non-entity joint ventures (TD 2022/7), confirms that when determining whether a partnership directly controls another entity under section 328-125, it is the partnership that is the relevant entity, rather than the individual partners in their capacity as partners (paragraph 6). Subsection 328-125(2) sets out when an entity directly controls another entity other than a discretionary trust and states: An entity (the first entity ) controls another entity if the first entity, its *affiliates, or the first entity together with its affiliates: (a) except if the other entity is a discretionary trust - own, or have the right to acquire the ownership of, interests in the other entity that carry between them the right to receive a percentage (the control percentage ) that is at least 40% of: (i) any distribution of income by the other entity; or (ii) if the other entity is a partnership - the net income of the partnership; or (iii) any distribution of capital by the other entity; or (b) if the other entity is a company .... The term 'affiliate' has the meaning provided by section 328-130 which states: 328-130(1) An individual or a company is an affiliate of yours if the individual or company acts, or could reasonably be expected to act, in accordance with your directions or wishes, or in concert with you, in relation to the affairs of the *business of the individual or company. 328-130(2) However, an individual or a company is not your affiliate merely because of the nature of the business relationship you and the individual or company share. Note: For small business relief purposes, a spouse or a child under 18 years may also be an affiliate under section 152-47. Example: A partner in a partnership would not be an affiliate of another partner merely because the first partner acts, or could reasonably be expected to act, in accordance with the directions or wishes of the second partner, or in concert with the second partner, in relation to the affairs of the partnership. Directors of the same company, or the company and a director of that company, would be in a similar position. For the purposes of determining the 'aggregated turnover' of the Partnership for the relevant income year, the Partnership was not connected with any entities in accordance with subsection 328-125(1). | Detailed Reasoning - Affiliates: In accordance with subsection 328-130(1) only an individual or company who is carrying on a business can be an affiliate of another entity. An individual or company would be an affiliate of the Partnership the individual or company acts, or could reasonably be expected to act, in accordance with the Partnerships directions or wishes, or in concert with the Partnership, in relation to the affairs of the individual or company's business. The Explanatory Memorandum to the Tax Laws Amendment (Small Business) Bill 2007 (EM 2007) emphasises the intention behind the affiliate rules: 2.35 ... The affiliate rules are designed to ensure that entities that genuinely carry on independent businesses are not aggregated... The EM 2007 then describes some factors that may assist in determining whether an individual or company is an affiliate: 2.36 The following factors may have a bearing on whether an individual or company is an affiliate of an entity to the extent that they show that two or more entities are acting in concert: • family or close personal relationships; • financial relationships or dependencies; • relationships created through links such as common directors, partners, or shareholders; • the degree to which the entities consult with each other on business matters; or • whether one of the entities is under a formal or informal obligation to purchase goods or services or conduct aspects of their business with the other entity. 2.37 None of these factors are determinative in their own right. There are no individuals or companies that are affiliates of the Partnership in accordance with the meaning provided by paragraph 328-115(2)(c). As the Partnership is carrying on a business in the current income year, it's annual turnover was less than $2 million in the 20XX income year and the Partnership's aggregated turnover for the 20XX income year was less than $2 million, the Partnership is a 'small business entity' for the purposes of section 328-110. | Detailed Reasoning - CGT asset satisfies the active asset test: Paragraph 152-10(1)(d) of the basic conditions requires that in order for a capital gain to be disregarded under Division 152, the CGT asset must satisfy the active asset test. The CGT active asset test is set out in section 152-35 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. The term 'active asset' is defined in subsection 152-40(1) as: 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. Person 1 and Person 2 have owned each Property B and C for greater than 15 years and both assets have been used in the Partnership business in the course of carrying on that business for the entire period of ownership by Person 1 and Person 2 and satisfy the active asset test in accordance with section 152-35 for the purposes of meeting the condition contained in paragraph 152-10(1)(d). | Detailed Reasoning - Basic conditions conclusion: As all of the conditions contained in paragraphs 152-10(1)(a) to 152-10(1)(d) are satisfied in relation to CGT event A1 happening in relation to Property B and Property C, Person 1 and Person 2 are eligible to apply the small business concessions to reduce their capital gain (or disregard where additional requirements are met). 15-year exemption Where the basic conditions set out in Subdivision 152-A are met, an entity may be able to disregard a capital gain arising from a CGT asset that it has owned for at least 15 years if certain additional conditions are met. The additional requirements for the 15-year exemption to apply are set out in Subdivision 152-B as follows: 152-105 15-year exemption for individuals 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...[not appliable] (d) either:> (i) you are 55 or over at the time of the CGT event and the event happens in connection with your retirement; or (ii) you are permanently incapacitated at the time of the CGT event. That is, Person 1 and Person 2 can each disregard the whole of their capital gain arising from CGT event A1 occurring when they transfer Property B (and Property C) to Person 3 if: • the basic conditions in Subdivision 152-A are satisfied for the gain, and • they continuously owned the CGT asset for the 15-year period ending just before the CGT event, and • either they are 55 or over at the time of the CGT event and the event happens in connection with their retirement; or they are permanently incapacitated at the time of the CGT event. As discussed above, Person 1 and Person 2 satisfy the basic conditions in Subdivision 152-A for the gain and will have continuously owned the relevant properties for the 15-year period ending just before the CGT event. Person 1 and Person 2 are both over 55 years old and therefore, they will meet the requirements of section 152-105 if the CGT event happens in connection with their retirement or they are permanently incapacitated at the time of the CGT event. | Detailed Reasoning - In connection with retirement: The EM Explanatory Memorandum to the New Business Tax System (Capital Gains Tax) Bill 1999 (EM 1999) makes the following statement about the requirement to be permanently incapacitated or retiring as one of the conditions for the 15-year exemption: 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 phrase 'in connection with' was considered in Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 ( Pozzolanic ), where the Full Court of the Federal Court stated at 288: The words 'connected with' are capable of describing a spectrum of relationships ranging from the direct and immediate to the tenuous and remote. As Sheppard and Burchett JJ observed in Australian National Railways Commission v Collector of Customs (SA ) [(1985) 69 ALR 367 at 377-378; 8 FCR 264, at 265] the meaning of the word 'connection' is wide and imprecise, one of its common meanings being 'relation between things one of which is bound up with, or involved in, another': Shorter Oxford English Dictionary . 'In connection with' in the context of being connected to the retirement of an individual was considered in Claremont Petroleum NL v Cummings (1992) 110 ALR 239 (Claremont). Wilcox J made the following observations regarding the phrase 'in connection with' in this context: The phrase "in connection with" is one of wide import, as I had occasion to observe in a different context in Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465 at p479-80; 77 ALR 577 at pages 591-2: The words 'in connexion with'...do not necessarily require a causal relationship between the two things: see Commissioner for Superannuation v Miller (1985)8 FCR 153 at 154, 160, 163; 63 ALR 237at 238, 244, 247. They may be used to describe a relationship with a contemplated future event: see Koppen v Commissioner for Community Relations (1986) 11 FCR 360 at 364, Johnson v Johnson [1952] P 47 at 50-1. In the latter case the United Kingdom Court of Appeal applied a decision of the British Columbia Court of Appeal, Re Nanaimo Community Hotel Ltd [1945] 3 DLR 225, in which the question was whether a particular court, which was given 'jurisdiction to hear and determine all questions that may arise in connection with any assessment made under this Act', had jurisdiction to deal with a matter which preceded the issue of an assessment. The trial judge held that it did, that the phrase 'in connection with' covered matters leading up to, or which might lead up to an assessment. He said...: 'One of the very generally accepted meanings of "connection" is "relation between things one of which is bound up with or involved in another"; or, again "having to do with". The words include matters occurring prior to as well as subsequent to or consequent upon so long as they are related to the principal thing. The phrase "having to do with" perhaps gives as good a suggestion of the meaning as could be had. The ATO had previously issued ATO Interpretative Decision ATO ID 2003/864 Income Tax CGT small business concessions: 15 year exemption - retirement (ATO ID 2003/864) which has since been withdrawn on the basis that the ATO view it contained is reflected in the publication 'Advanced guide to capital gains tax concessions for small business' (Guide). The Guidediscusses that 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 or after retirement. It is not necessary for there to be a permanent and everlasting retirement from the workforce, but there needs to at least be a significant reduction in the number of hours the individual works, or a significant change in the nature of their present activities. Person 1 and Person 2 intend to dispose of three of the five properties they use as active assets in their Partnership business. They will retain ownership of the property that is also their main residence (Property A) and one other property (Property E) that is used as an active asset in their Partnership. The transfer of these properties signifies a significant downsizing of overall operation size of their Partnership business and will be made with the intention of transitioning to a full retirement. Person 2 is X and Person 1 is XX years old. Age, physical health, caring responsibilities and an intention to transition to retirement has led Person 1 and Person 2 to work less in recent years and continually employ greater numbers of employees to perform both the physical and managerial work of the Partnership. Person 1 and Person 2 intend to transfer or sell the stock on these Property B, Property C and Property D. Their medical doctors have encouraged them to continue to work in some capacity for their overall health and that recommendation, as well as a personal desire to live at their existing home (which is also used location for the Partnership business) for as long as they are physically able has influenced the retirement and succession plan to retain two of the five properties used as active assets. Person 1 and Person 2 each expect to be working less than X hours per week, when before their transition to retirement, they were working approximately YY hours each per week. We therefore accept that it is reasonable to conclude that CGT event A1 will occur when Property B is transferred to Person 3, and that it will be occurring in connection with H's retirement for the purposes of subsection 152-105(d). | Summary: When Person 1 and Person 2 dispose of Property B the basic conditions in Subdivision 152-A will be met, Person 1 and Person 2 will have continuously owned the CGT asset for the 15-year period ending just before the CGT event, Person 1 and Person 2 are over the age of 55 and the CGT A1 event that occurs will be in connection with their retirement. As such, the Commissioner is satisfied that in these circumstances the requirements of the 15-year exemption, pursuant to subdivision 152-B are met meaning that Person 1 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of the Property B. | Summary: Person 1 satisfies the small business basic conditions for relief contained in Subdivision 152-A and the specific conditions contained in section 152-105 and as such, the requirements of the 15-year exemption, pursuant to subdivision 152-B are met such that Person 1 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of Property C. | Detailed Reasoning - Detailed Reasoning: Refer to the reasoning discussed in question 1 above. The same reasoning can be applied to conclude that when Person 1 and Person 2 dispose of Property C, the basic conditions in Subdivision 152-A will be met, Person 1 and Person 2 will have continuously owned the CGT asset for the 15-year period ending just before the CGT event, Person 1 and Person 2 are over the age of 55 and the CGT event A1 that occurs will be in connection with their retirement. As such, the Commissioner is satisfied that in these circumstances the requirements of the 15-year exemption, pursuant to subdivision 152-B are met meaning that Person 1 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of Property C. | Summary: Person 2 satisfies the small business basic conditions for relief contained in Subdivision 152-A and the specific conditions contained in section 152-105 and as such, the requirements of the 15-year exemption, pursuant to subdivision 152-B are met meaning that Person 2 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of Property B. | Detailed Reasoning - Detailed Reasoning: Refer to the reasoning discussed in question 1 above. The same reasoning can be applied to conclude that the Commissioner is satisfied that in these circumstances the requirements of the 15-year exemption, pursuant to Subdivision 152-B are met meaning that Person 2 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of Property B. | Summary: Person 2 satisfies the small business basic conditions for relief contained in Subdivision 152-A and the specific conditions contained in section 152-105 and as such, the requirements of the 15-year exemption, pursuant to subdivision 152-B are met meaning that Person 2 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of Property C. | Detailed Reasoning - Detailed Reasoning: Refer to questions 1 and 2 above. For the same reasons the Commissioner is satisfied that in these circumstances the requirements of the 15-year exemption, pursuant to Subdivision 152-B are met meaning that Person 2 can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of the property located at Property C.

Reasons for decision: All legislative references are references to the Income Tax Assessment Act 1997 unless otherwise stated