Private ruling: CGT - small business concessions - 15-year exemption - extension of time
Date of advice: 4 September 2025
Published: 3 November 2025
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does the Trust meet the basic conditions under section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997) to apply the small business capital gains tax (CGT) concessions on the disposal the commercial property (the Property)? | A1: Yes. | Q2: Is the Trust eligible to apply the small business 15-year exemption to disregard the capital gain made on the disposal of the Property? | A2: Yes. | Q3: Will the Commissioner exercise their discretion contained in subsection 152-125(4) of the ITAA 1997 to extend the two-year time limit required to make payment to a CGT concession stakeholder under paragraph 152-125(1)(b) of ITAA 1997 30 June 2027 in relation to the Property? | A3: Yes.

Relevant facts and circumstances: The Property was purchased by the Trust in 19XX. Since purchase 100% of the floor space of the Property has been continuously rented to the Company. The Property was the business address from which the Company operated a business. From incorporation person A has been 100% shareholder. The Company has an aggregated turnover of less than $2 million in the financial year of sale. The Trust is a unit trust. 100% of the unitholding have been held by person A since July 20XX. Before the CGT event, person A was averaging about 30 hours per week and was only opening the shop on Tuesdays, Wednesdays, and Thursdays. Hours were then reduced to 11 hours per week doing jobs in the Company's business. After September 20XX they spent 5-6 hours a week doing minor jobs and preparing the Property for sale. The contract for the sale of the Property occurred December 20XX and the sale resulted in a capital gain. After the sale, person A retired from working in the business. Continuing to work was not an option following the sale of the business premises as person A's health had declined. Person A received 100% of the income distributions every year except for the six financial years where no distributions were made due to the trust having made losses. Any income or capital to distribute in the financial year of sale, 100% will be distributed to person A. The contract has a settlement date that is more than 2 years from contract date. The long settlement was decided to due to the buyer having to sell an existing property they owned, and Person A knew that there was not much buyer interest in the area. Person A planned to sell the Property as part of their retirement plan, so the expression of interest by the buyer meant a certain sale, a sale of market value, and a sale without the costs of marketing or sale commission. Person A was over 55 years old when the CGT event occurred.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 152-A | Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 subsection 152-35 | Income Tax Assessment Act 1997 subsection 152-40 | Income Tax Assessment Act 1997 section 152-55 | Income Tax Assessment Act 1997 section 152-65 | Income Tax Assessment Act 1997 section 152-70 | Income Tax Assessment Act 1997 section 152-75 | Income Tax Assessment Act 1997 Subdivision 152-B | Income Tax Assessment Act 1997 paragraph 152-125 | Income Tax Assessment Act 1997 section 328-125 Question 1 | Does the Trust meet the basic conditions under section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997) to apply the small business capital gains tax (CGT) concessions on the disposal the commercial property (the Property)?

Reasons for decision: Summary: Is the Trust eligible to apply the small business 15-year exemption to disregard the capital gain made on the disposal of the Property? | Detailed Reasoning - Reasons for decision: Section 152-110 of the ITAA 1997 says that for the trust to be eligible for the small business 15-year exemption it must satisfy the basic conditions and three further conditions: • the Trust had a significant individual for a total of at least 15 years (even if the 15 years was not continuous and it was not always the same significant individual) during which the Trust owned the CGT asset; - the significant individual is 55 or over at the time of the CGT event and the event happens in connection with their retirement; or - the significant individual is permanently incapacitated at the time of the CGT event. Whether a CGT event happens in connection with an individual's retirement depends on the particular circumstances of each case. A CGT event may be in connection with your retirement even if it occurs at some time before retirement. Significant Individual Section 152-55 of the ITAA 1997 defines 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 the company or trust of at least 20%. Section 152-65 of the ITAA 1997 says 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. Direct small business participation percentage The table in subsection 152-70(1) of the ITAA 1997 helps to work out an entity's direct small business participation percentage. An entity's direct small business participation percentage in a company is: (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 2 different percentages are applicable, the smaller. Application to your circumstances In 12 years, person A received a distribution of 20% or more from the Trust. In the 4 of the financial years the trust did not make any distributions due to making a loss so paragraph 152-70(4)(b) of the ITAA 1997 says that you apply subsection 152-70(5) of the ITAA 1997, so we look at the last year distribution was made which was 20XX. In the 20XX income year the distribution went 100% to person A so they are considered to have a 100% small business participation percentage in the Trust in the 20XX income year. Applying paragraph 152-70(5)(b) of the ITAA 1997, person A would be considered to have a 100% small business participation percentage in the Trust in the other 4 years. In summary, person A is considered to have a 20% or higher small business participation percentage in 20XX to 20XX resulting in there being a significant individual of the trust for 15 years. In conclusion, the Trust meets the basic conditions as outlined in question 1. The Trust has continuously owned the Property for over 15 years just before the CGT event. The Trust is considered to have a significant individual for 15 years and person A was over 55 years old and has retired as a result of the sale. Therefore, the Trust is entitled for the small business 15-year exemption on the disposal of the Property. | Detailed Reasoning - Question 3: Will the Commissioner exercise their discretion contained in subsection 152-125(4) of the ITAA 1997 to extend the two-year time limit required to make payment to a CGT concession stakeholder under paragraph 152-125(1)(b) of ITAA 1997 30 June 2027 in relation to the Property? | Detailed Reasoning - Reasons for decision: Under subsection 152-125(4) of the Income Tax Assessment Act 1997 (ITAA 1997) the Commissioner may extend the two-year time limit to make an exempt payment to a trust's significant individual. The Commissioner generally extends the time limit where the delay in receiving the capital proceeds is out of your control. In determining whether to allow an extension of time, the Commissioner considers the following factors: The Trust signed an agreement to sell the property and receive payment 26 months after settlement. This was agreed to as person A wanted to sell and retire, and the buyer needed to sell their current property. This is an acceptable explanation and is fair and reasonable. There is no mischief involved or prejudice to the Commissioner if additional time is allowed.

A capital gain that you make may be reduced or disregarded under Division 152-A of the Income Tax Assessment Act 1997 (ITAA 1997) if the following basic conditions are satisfied: | a CGT event happens in relation to a CGT asset of yours in an income year | the event would have resulted in a gain | the CGT asset satisfies the active asset test in section 152-35 of the ITAA 1997, and | at least one of the following applies; | - You are a CGT small business entity for the income year | - you satisfy the maximum net asset value test in section 152-15 of the ITAA 1997 | - 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, or | - you do not carry on a business, but your CGT asset is used in a business carried on by a small business entity that is your affiliate or an entity connected with you. | The active asset test outlined in section 152-35 of the ITAA 1997. The active asset test is satisfied 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). | The test period beings when you acquired the asset and ends at the earlier of the CGT event and if the relevant business ceased to be carried on in the 12 months before that time - the cessation of the business. | Section 152-40 of the ITAA 1997 explains that a CGT asset is an active asset if it is owned by you and is used or held ready for use in a business carried on (whether alone or in partnership) by you, your affiliate, your spouse or child, or an entity connected with you. | Section 328-110 defines the meaning of a small business entity to be: | 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 $2 million; | (ii) your aggregated turnover for the current year is likely to be less than $2 million. | Subsection 328-125(1) says that an entity is connected with another entity if: | (a) either entity controls the other entity in a way described in this section; or | (b) both entities are controlled in a way described in this section by the same third entity. | Control of a company and unit trust | Section 328-125(2) explains that an entity controls another entity if it or its affiliate (or all of them together): | • beneficially owns, or has the right to acquire beneficial ownership of, interests in the other entity that give the right to receive at least 40% (the control percentage) of | - any distribution of income or capital by the other entity, or | - if the other entity is a partnership, the net income of the partnership or | • if the other entity is a company, beneficially owns, or has the right to acquire beneficial ownership of, equity interests in the company that give at least 40% of the voting power in the company. | The Trust sold the Property on December 20XX. The event resulted in a capital gain. The Trust owned the Property for over 15 years. The Property was used for the entire ownership period by the Company to carry on a business. As the Company carries on a business and has an aggregated turnover of less than $2 million it is a small business entity. The Trust and the Company are both controlled by person A as they own 100% unitholding and shares, respectively. The Trust does not carry on a business, but the Property was used by a connected entity for over 7.5 years to carry on a business. Therefore, the Trust meets the basic conditions under 152-10 of the ITAA 1997. | the Trust continuously owned the CGT asset for the 15-year period ending just before the CGT event; | whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension | whether there is any prejudice to the Commissioner if the additional time is allowed (however, the mere absence of prejudice is not enough to justify the granting of an extension) | whether there is any unsettling of people, other than the Commissioner, or of established practices | the need to ensure fairness to people in like positions and the wider public interest | whether there is mischief involved, and | the consequences of the decision.