Private ruling: Capital gains tax
Date of advice: 2 April 2026
Published: 29 June 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Did you satisfy the requirements for thesmall business 50% active asset reduction in section 152-205 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the disposal of your interest in the Property? | A1: Yes. | Q2: Can you apply the small business retirement exemption in section 152-305 of the ITAA 1997 to disregard all or part of the capital gain you made on the disposal of your interest in the Property? | A2: Yes.

Relevant facts and circumstances: In 20XX as part of a succession arrangement, your parents transferred ownership of the Property to you and your siblings (Sibling 1 and Sibling2). Your parents wishes were for the Property to remain in the family and it was up to you and your siblings to decide how it would happen. There were no official agreements documenting this arrangement. At that time you were carrying on a partnership business with your spouse on another property that you continue to carry on today. Your siblings operated a partnership business on the Property from 20XX to 20XX. You allowed your siblings to use the Property for no charge. Practically, Sibling 1 operated a business on the Property from 20XX to 20XX and Sibling 2 operated the business from 20XX to 20XX. During the period Sibling 1 operated the business on the Property you and Sibling 2 would help them on a pro-bono basis. Similarly, when Sibling 2 operated the business you and Sibling 1 would help them on a pro-bono basis. Sibling 1 lived on another property they farmed with their spouse when they moved off the Property in 20XX. During the periods Sibling 1 and Sibling 2 were in charge of the Property you agisted some sheep on the Property free of charge as you had always assisted with grading, mustering, shearing, lamb marking, electrical work and caretaking free of charge. From around 20XX to 30 June 20XX your child and their spouse operated a business on the Property. You worked closely with your child to help them set up the business (similar to the earlier arrangement with your siblings) and you shared equipment and labour and moved stock between properties as it suited. Your child and their spouse paid a fee to your siblings for use of the Property. You were entitled to a payment but never accepted one. Sibling 2 sold a large number of stock to your child and their spouse on the open market to reduce their activities. In the period in or around 20XX to 20XX your other property was decimated by drought; however, the Property was not as badly affected. During this period you relied on the relationship with your siblings to move your livestock to the Property to keep your business going. The total net value of CGT assets owned by you, entities connected with you, your affiliates and entities connected with your affiliates, just before the sale of your interest in the Property did not exceed $6 million. You are over 55 years of age and do not intend on retiring any time soon. You sold your interest in the Property to Sibling 1 in June 20XX and made a capital gain. You have never applied the small business retirement exemption to reduce or disregard a capital gain. You will make the choice to apply the small business retirement exemption to disregard all or part of the capital gain by the day you lodge your income tax return for the year ended 30 June 20XX (or within a further time allowed by the Commissioner) You will keep a written record of the amount you choose to disregard under the small business retirement exemption (the CGT exempt amount).

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 152-A | Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-40 | Income Tax Assessment Act 1997 Subdivision 152-C | Income Tax assessment Act 1997 section 152-205 | Income Tax Assessment Act 1997 Subdivision 152-D | Income Tax assessment Act 1997 section 152-305 | Income Tax Assessment Act 1997 section 328-130 | Income Tax Assessment Act 1997 subsection 328-130(1)

Reasons for decision: Summary: As you satisfied the basic conditions the small business 50% active asset reduction applies to the capital gain you made on the disposal of your interest in the Property unless you choose for it not to apply. | Detailed Reasoning - Detailed reasoning: The rules covering the small business 50% active asset reduction are contained in Subdivision 152-C of the ITAA 1997. Unlike the other small business capital gains tax (CGT) concessions, the small business 50% active asset reduction applies automatically if the basic conditions in Subdivision 152-A of the ITAA 1997 are satisfied, unless you choose for it not to apply. Basic conditions As such, the small business 50% active asset reduction applies 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 resulted in a gain • the CGT asset satisfied the active asset test in section 152-35 of the ITAA 1997, and • at least one of the following applies: ­ you are a small business entity for the income year ­ you satisfy the maximum net asset value test 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 (section 152-10 of the ITAA 1997). In your case the basic conditions contained were satisfied because: • a CGT event happened when you disposed of your interest in the Property • you made a capital gain on the disposal • you owned your interest in the Property for more than 15 years and the Property was used in businesses carried on by your affiliates for a total of at least 7 ½ years during the test period, and • you satisfied the maximum net asset value test as the total net value of CGT assets owned by you, entities connected with you, your affiliates and entities connected with your affiliates, did not exceed $6 million just before you disposed of your interest in the Property. As you satisfied the basic conditions in Subdivision 152-A of the ITAA 1997 the small business 50% active asset reduction applies to the capital gain you made on the disposal of your 20% interest in the Property unless you choose for it not to apply. | Summary: You satisfied the basic conditions in Subdivision 152-A of the ITAA 1997 in relation to the gain you made from the disposal of your interest in the Property. As a result, you may choose to apply the small business retirement exemption after the small business 50% active asset reduction to the remaining 50% (or if the general 50% CGT discount has also been applied, the remaining 25%) of the capital gain after any capital losses have been applied. | Detailed Reasoning - Detailed reasoning: Subsection 152-305(1) of the ITAA 1997 provides that if you are an individual 55 years of age or over, you can choose to disregard all or part of a capital gain if the basic conditions in Subdivision 152-A are satisfied for the gain. The choice must be made: (a) by the day you lodge your income tax return for the income year in which the relevant CGT event happened, or (b) within a further time allowed by the Commissioner (section 103-25 of the ITAA 1997), and (c) in a way that ensures that your CGT retirement limit [of $XXX,XXX] is not exceeded (paragraph 152-315(2)(a) of the ITAA 1997). The amount chosen for the asset is the CGT exempt amount (subsection 152-315(3) of the ITAA 1997). The CGT exempt amount must be specified in writing (subsection 152-315(4) of the ITAA 1997). As outlined above, you satisfy the basic conditions in Subdivision 152-A of the ITAA 1997 for the capital gain made on the disposal of your interest in the Property. Provided you make the choice to apply the small business retirement exemption to disregard all or part of the capital gain by the day you lodge your income tax return for the year ended 30 June 20XX (or within a further time allowed by the Commissioner) and keep a written record of the amount you choose to disregard, you may choose to apply the small business retirement exemption to the capital gain. You may make the choice after the small business 50% active asset reduction, that is, you may apply the exemption to the remaining 50% (or if the general 50% CGT discount has also been applied, the remaining 25%) of the capital gain after any capital losses have been applied.