Private ruling: CGT - active asset
Date of advice: 3 June 2026
Published: 17 August 2026
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Do you meet the basic conditions for relief in section 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997) on the sale of the property? | A1: Yes . A CGT event happened when you disposed of the property, and you made a capital gain on the disposal. You met the maximum net asset value test just before the CGT event. The property satisfies the active asset test as it has been owned by you for more than 15 years and you used the property in your business of short-term boarding accommodation for a total of at least 7.5 years, therefore you have met the basic conditions in section 152-10 of the ITAA 1997 in relation to the sale of the property.

Relevant facts and circumstances: You acquired the property on D MM 19YY, as a sole owner. The property consisted of X bedrooms, with X tenants living in it. The previous year you had run another property as a backpacker hostel. You moved into the property in MM 19YY and began letting it as a short-term accommodation backpacker hostel. Under a valid license, the activities annual income was less than $X. From 19YY to 20YY the property consisted of X bedrooms available for rent, depending on renovations and was used as a boarding house/backpacker hostel as registered with the local council. The rooms within the property had the following setup: • Room 1 double room • Room 2 twin room • Room 3 single room until 19YY and then a bathroom • Room 4 X beds • Room 5 twin room • Room 6 single room until 19YY and then a communal kitchen, outside deck mezzanine • Room 7 X beds and kitchenette • Room 8 twin room • Room 9 double room with own kitchen and bathroom After you moved into the property you occupied one room as your main residence, and occasionally X rooms during renovations. The X lettable rooms consisted of XX beds which were rented out for $X per week or $X per night (on average). In MM 20YY you registered an ABN as a sole trader. You were registered for GST from MM 20YY to MM 20YY. The property was listed in various backpacker guides. You kept a diary of time to record the days that each lodger stayed, on average a lodger lived in the property for X. The lodgers were entitled to access and use a designated bedroom, bedding and shared facilities. From MM 19YY to 20YY you estimate that you spent around X hrs per week undertaking the following duties in relation to your activity: • check ins/check outs • cleaning • laundry • accounts/ other paperwork • answering the phone • chasing up tradesmen • buying supplies You provided the following extra services to boarders: • breakfast on X • laundry • changing linen and towels • general cleaning • common areas (kitchen, bathrooms etc). You had landlord and public liability insurance. In MM 20YY your trading name registration expired and has not been renewed since. In 20YY the council and relevant state departments were notified in writing on various occasions that you intended to cease the boarding house activities. You made applications to the council to revoke the property status as a boarding house. In 20YY/20YY the property was converted from X bedrooms into X units (X x X bedroom and X x X bedroom), and then into X units (X x X-bedroom, X studio, and one X bedroom with ensuite). The property was still used for backpackers and foreign students from X University and University of X and was listed on their accommodation provider list. These students stayed X terms with all services including cleaning, bedlinen and communal use of bathrooms. All students were on a term-by-term arrangement. From mid-20YY, a X-month lease requirement to the lodgers / tenants was put in place. You started to advertise the property on X, X websites and others. From 20YY, you signed an agreement with a real estate agent, and lease agreement was required from that time onwards. The property became available to lodgers/ tenants as medium or long-term accommodation. Tenants started to extend their stay in the property to a few months and/or a few years. The property management activities reduced to X hours/week, and then further reduced to less than X hours/week during the Covid pandemic. In MM 20YY, the City Council confirmed that the boarding house use of the property was cancelled, and that any future proposal to use the property as a boarding house would need to rely on a new and valid consent. Your net asset position for the purposes of the maximum net asset value test was less than $X just prior to the sale of the property. The property was sold in MM 20YY.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 152 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-40 | Income Tax Assessment Act 1997 subsection152-40(1) | Income Tax Assessment Act 1997 subsection152-40(4) | Income Tax Assessment Act 1997 paragraph152-40(4)(e)