Private ruling: Small business CGT concessions
Date of advice: 1 September 2025
Published: 27 October 2025
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is Company A eligible for, and therefore must use, the Small Business 15-year CGT exemption under Subdivision 152-B of the Income Tax Assessment Act 1997 (ITAA 1997) to exempt entire capital gain on sale of the business? | A1: Yes. | Q2: If the answer to question 1 is yes, will the Commissioner exercise the discretion to extend the time period under subsection 152-125(4) of the ITAA 1997 for payments of any exempt amounts to be made by Company A to the CGT concession stakeholders to cover the entire vendor finance period? | A2: Yes. | Q3: If the answers to questions 1 and 2 are yes, will the Commissioner consider that the exempt part of the principal component of each repayment received by Company A and then paid out to the CGT concession stakeholders to be CGT exempt distributions that are not assessable to the CGT concession stakeholders and not deductible to Company A? | A3: Yes. | Q4: If the answers to questions 1,2 and 3 are yes, will the CGT concession stakeholders be eligible to contribute the CGT exempt distributions to their superannuation fund under the CGT cap providing they do so within 30 days of receiving the distribution from Company A and make valid Capital Gains Tax Cap Elections on or before each contribution? | A4: Yes. | Q5: If any of the answers to questions 1,2,3 or 4 are no, or should the CGT concession stakeholders wish, would it be possible to treat the full $XXX proceeds as if they have been received by Company A, distributed in full to the stakeholders as CGT exempt distributions and immediately lent back to Company A as a loan? This would allow for the principal component of vendor finance repayments to be paid back to the CGT concession stakeholders as repayment of the money lent back to Company A, and the interest component to be assessable income to Company A? | A5: Not applicable. | Q6: If the answer to question 5 is yes, would the maximum amount allowed to be contributed to superannuation by the CGT concession stakeholders under the CGT cap be limited to the $240,000 proceeds physically received initially? | A6: Not applicable.

Relevant facts and circumstances: Business (Company A) & CGT Concession Stakeholders Company A has operated a mortgage broking business continuously since 20XX Company A has a specified number of ordinary shares on issue. Individuals A & B (CGT concession stakeholders) each own XX% of the ordinary shares. The shares have been held continuously since March 19XX. The CGT concession stakeholders have worked continuously in the business since it began and are over 55 years of age. They have reduced their involvement in the business significantly over the last XX months. Individual A is currently working approximately XX hours per week on average which should go to nil once the business is sold. Individual B is currently working approximately XX hours per week on average and that will go down to around X hours per week once the business is sold. The gross turnover of Company A is less than $2 million. Proposed Transaction Company A would like to sell the business, including loan book, and minimal tangible assets to the CGT concession stakeholders children who have worked in Company A for a number of years. The business will be sold by Company A to Company B established by the children which will be owned equally by the children's family trusts. The business is to be sold for $XXX. $XXX of the purchase transaction will be funded by one of the children lending funds to Company B, for it to pay in cash to Company A. Company A will distribute funds to the 2 CGT concession stakeholders equally. The funds are intended to be contributed to the superannuation funds of the CGT concession stakeholders. The balance of the purchase price is to be financed. As the financial institutions require large valuation fees for the loan look and the children's property to approve finance, the plan is to finance the balance of the purchase price by a loan made by Company A to Company B. Terms of the Loan $XX to be repaid over ten years by Company B. A variable interest rate of X per annum is to be charged on the loan. Company A intends to distribute the loan repayments to the CGT concession stakeholders promptly on receipt. Similar terms were proposed by one of the banks. A draft loan agreement has not been prepared yet.

Relevant legislative provisions: 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 section 152-55 | Income Tax Assessment Act 1997 section 152-110 | Income Tax Assessment Act 1997 section 152-125 | Income Tax Assessment Act 1997 section 292-100 | Income Tax Assessment Act 1997 section 292-105 | Income Tax Assessment Act 1997 section 328-110

Reasons for decision: Summary: Yes. As the basic conditions contained in section 152-10 of ITAA 1997 are satisfied, Company A is eligible for the CGT small business concessions. As the specific conditions regarding the 15-year exemption for companies and trusts, contained in section 152-110 of ITAA 1997 are satisfied, Company A is eligible to disregard the capital gain from the sale of the business. | Detailed Reasoning - Basic conditions - small business CGT concessions: To access the small business CGT concessions, you must meet the basic conditions for relief under section 152-10 of the ITAA 1997. You may reduce or disregard a capital gain you make under Division 152 of the ITAA 1997 if a CGT event happens in related to a CGT asset of yours in an income year and the event would have resulted in a gain. You must be a small business entity for the income year or satisfy the maximum net asset value test. The asset must also meet the active asset test. 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) *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 your 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: • be carrying on a business; and • satisfy any 1 of 3 tests based on turnover: ­ 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); ­ 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 ­ 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: • the entity is winding up a business it formerly carried on; and • it was a small business entity in the income year that it stopped carrying on the business. | Detailed Reasoning - Application to your circumstances: As Company A's turnover is less than $2 million, Company A is considered to be a small business entity. Therefore, the condition contained in paragraph 152-10(1)(c)(i) of ITAA 1997 is satisfied. | Detailed Reasoning - Active asset test: The active asset test is contained in section 152-35 of the ITAA 1997. The test is satisfied where an asset is owned for more than 15 years, and the asset was an active asset for a total of at least 7.5 years in the test period. The test period begins when the asset was acquired and ends at the CGT event. Under subsection 152-40(1) of the ITAA 1997, a CGT asset is an active asset if it is owned and used, or held ready for use, by you, your affiliate, or another entity that is connected with you in the course of carrying on a business that is carried on, whether alone or in partnership. | Detailed Reasoning - Is the loan book considered to be an active asset of the business?: A CGT asset is any kind of property, or a legal or equitable right that is not property (subsection 108-5(1) of the ITAA 1997). Taxation Ruling TR 2000/1 Income tax: insurance registers (TR 2000/1) provides guidelines on the taxation consequences of acquiring or disposing of an insurance register. In accordance with paragraph 2 of TR 2000/1, for the purposes of the ruling an insurance register is a record of the rights of an insurance agent to future commissions and a record of policyholders that an agent has an exclusive right to deal with on behalf of an insurance company. TR 2000/1 considers that an insurance register is a capital asset where it is held as part of the profit-making structure of a business (paragraph 11 of TR 2000/1). | Detailed Reasoning - Application to your circumstances: Loan books are comparable to insurance registers. As the loan book you own form part of the profit yielding structure of your mortgage broking business, the Commissioner considers the loan book to be CGT asset. As a result, amounts you receive for disposing of the loan book would be of a capital nature and constitute capital proceeds for the disposal of a CGT asset. Any gain made on that disposal would be assessed under the CGT provisions. | Detailed Reasoning - 15-year exemption: The CGT small business 15-year exemption in Subdivision 152-B of the ITAA 1997 permits a company or trust may disregard an amount in determining its taxable income if, amongst other things, the amount is paid to a CGT concessional stakeholder within 2 years after the relevant CGT event. Subdivision 152-B of the ITAA 1997 outlines the small business 15-year exemption. Under this subdivision, a CGT small business entity can choose to disregard a capital gain arising from a CGT asset that it has owned for at least 15 years if certain conditions are met. Section 152-110 provides that a company can disregard any gain arising from a CGT event if all of the following conditions are satisfied: • the basic conditions of Subdivision 152-A are satisfied; • the company continuously owned the CGT asset for the 15-year period ending just before the CGT event; • the company had a significant individual for a total of at least 15 years during which the company owned the CGT asset; • the significant individual of the company just before the CGT event either: ­ was 55 or over at the time of the CGT event and the event happens in connection with the significant individual's retirement; or ­ the significant individual is permanently incapacitated at the time of the CGT event. | Detailed Reasoning - Application to your circumstances: The basic conditions of Subdivision 152-A of ITAA 1997 applicable to your circumstances are satisfied, as outlined above. Company A continuously owned the business assets for the 15-year period ending just before the CGT event. Moreover, Company A has X significant individuals, that have a small business participation percentage of at least XX%, as required by section 152-55 of ITAA 1997. The significant individuals are over 55 years old and the sale of the business happens in connection with their retirement, as their involvement in business matters of Company A and their working hours will be significantly reduced. As such, the conditions of section 152-110 of the ITAA 1997 are satisfied and Company A can choose to disregard a capital gain arising from the disposal of CGT assets. | Detailed Reasoning - Question 2: If the answer to question 1 is yes, will the Commissioner exercise the discretion to extend the time period under subsection 152-125(4) of the ITAA 1997 for payments of any exempt amounts to be made by Company A to the CGT concession stakeholders to cover the entire vendor finance period? | Summary: Yes. In this case the Commissioner will extend the time limit for payment of the exempt amount to CGT concession stakeholders from 2 years to ten years. | Detailed Reasoning - Detailed reasoning: The Commissioner's extension (subsection 152-125(4) of ITAA 1997) Section 152-125 of the ITAA 1997 provides that if a capital gain made by a company or trust is disregarded under the small business 15-year exemption any distributions made by the company or trust of that exempt amount to a CGT concession stakeholder is: • not included in the assessable income of the CGT concessions stakeholder, and • not deductible to the company or trust if certain conditions are satisfied. The conditions are: • the company or trust must make a payment within X years after the CGT event that resulted in the capital gain or, in appropriate circumstances, such further time as allowed by the Commissioner • the payment must be made to an individual who was a CGT concessions stakeholder of the company or trust just before the CGT event, and • the total payments made to each CGT concession stakeholder must not exceed an amount determined by multiplying the CGT concession stakeholder's control percentage by the exempt amount. It has been recognised that the requirement to distribute the exempt amount within X years may cause problems where the capital proceeds are to be received by instalments (which is commercial practice). Subsection 152-125(4) of the ITAA 1997 allows the Commissioner to extend the X-year time limit. In determining if a discretion should be exercised, the Commissioner will consider the following factors: • whether there is evidence of an acceptable explanation for the period of extension requested and that 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 • fairness to people in like positions and the wider public interest • whether there is any mischief involved, and • a consideration of the consequences. | Detailed Reasoning - Application to your circumstances: You have sold your business. You will provide vendor financing to the purchasers and the payments will be paid in instalments over ten years. The explanation for the period of extension requested provided by you is acceptable. Due to the purchasing arrangement in place, you will receive multiple payments more than 2 years after the CGT event. You are therefore unable to meet the requirements of subsection 152-125(1) of the ITAA 1997 unless the Commissioner extends the time limit. There would be no prejudice to the Commissioner in allowing the extension. Other people would not be unsettled, and it would not be unfair to people in like positions or the wider public. There does not appear to be any mischief involved. It would be fair and equitable in the circumstances to allow an extension of time. Accordingly, the time limit to make payments to the CGT concession stakeholders of Company A will be extended. The super contributions should be made within XX days after Company A makes the payment. | Detailed Reasoning - Question 3: If the answers to questions 1 and 2 are yes, will the Commissioner consider that the exempt part of the principal component of each repayment received by Company A and then paid out to the stakeholders to be CGT exempt distributions that are not assessable to the CGT concession stakeholders and not deductible to Company A? | Summary: In line with section 152-125 of the ITAA 1997, the distributions made by Company A to the CGT concession stakeholders will not be included in their assessable income for the relevant years. Any payments made in excess of the stakeholder's participation percentage limit will be included in their assessable income for the relevant year. Moreover, these amounts are not deductible to Company A. | Detailed Reasoning - Detailed reasoning: The Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No 7) Act 2001, that amends the ITAA 1997, the Income Tax Assessment Act 1936 (ITAA 1936) and the Income Tax (Transitional Provisions) Act 1997 to reduce the compliance costs for small business and increase the availability of the CGT concessions states as follows: 1.61 A payment relates to the exempt amount to the extent that it represents a distribution of the capital gain. It is not intended that other payments, such as salary, fringe benefits, repayments of loans, dividends or eligible termination payments, should have different consequences for CGT concession stakeholders than they otherwise would. This amendment addresses Recommendation 10.3 of the Board of Taxation report. | Detailed Reasoning - Application to your circumstances: The payments in relation to the capital gain received by the CGT concession stakeholders of Company A over the period of 10 years are exempted from income tax. However, the interest received from the repayments of the loan provided by Company A is assessable. | Detailed Reasoning - Question 4: If the answers to questions 1,2 and 3 are yes, will the CGT stakeholders be eligible to contribute the CGT exempt distributions to superannuation under the CGT cap providing they do so within XX days of receiving the distribution from Company A and make valid Capital Gains Tax Cap Elections on or before each contribution? | Summary: Yes. The CGT stakeholders be eligible to contribute the CGT exempt distributions to superannuation under the CGT cap providing they do so within XX days of receiving the distribution from Company A and make valid Capital Gains Tax Cap Elections on or before each contribution | Detailed Reasoning - CGT lifetime cap: Paragraph 292-90(2)(c) of the ITAA 1997 provides for certain types of contributions to be excluded from being considered a non-concessional contribution. One such contribution is a contribution covered under section 292-100 relating to certain CGT-related payments, to the extent that it does not exceed the CGT cap amount when it is made. Subsection 292-100(1) of the ITAA 1997 states that a contribution is covered under this section if it is: • a contribution made by an individual to a fund in respect of the individual. • the requirement in subsections (2), (4), (7) or (8) are met, and • the individual chooses to apply this section to an amount that is all or part of the contribution. Where an individual intends to disregard any capital gain resulting from a CGT event under section 152-105 of the ITAA 1997 (15-year exemption for individuals), subsection 292-100(2) is the appropriate subsection to consider. Paragraph 292-100(2)(b) requires an individual to make a contribution to their superannuation fund before the later of: • the day they are required to lodge their income tax return for the income year in which the CGT event happened; • XX days after the day they receive the capital proceeds You have indicated that the applicants are eligible for the small business CGT concessions relating to the sale of the CGT asset, under section 152-105 of the ITAA 1997. Where a person is eligible for the 15-year exemption, they may contribute all or part of the capital proceeds from the sale of the asset provided they are made within the legislated timeframe. The choice to exclude the contribution from being a non-concessional contribution will only be valid if it is made in the approved form and given to the relevant super fund on or before the time the contribution is made. An individual's lifetime CGT contribution cap amount, according to section 292-105 of the ITAA 1997, are:2024 to 2025 $1.780m and 2025 to 2026 $1.865m. | Detailed Reasoning - Application to your circumstances: In your case, if the applicant's contribution amount does not exceed the CGT contribution cap amount, it will be excluded from being considered a non-concessional contribution. | Detailed Reasoning - Question 5: If any of the answers to questions 1,2,3 or 4 are no, or should the CGT stakeholders wish, would it be possible to treat the full $XXX,XXX proceeds as if they have been received by Company A, distributed in full to the stakeholders as CGT exempt distributions and immediately lent back to Company A as a loan? This would allow for the principal component of vendor finance repayments to be paid back to the CGT stakeholders as repayment of the money lent back to Company A, and the interest component to be assessable income to Company A? | Summary: Not applicable. The answers to questions 1,2,3 and 4 are yes. | Detailed Reasoning - Question 6: If the answer to question 5 is yes, would the maximum amount allowed to be contributed to superannuation by the CGT stakeholders under the CGT cap be limited to the $XXX,XXX proceeds physically received initially? | Summary: Not applicable as question 5 is not applicable.

Does IVA apply to this private ruling?: Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement. | If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website ato.gov.au/gaar. | Is company eligible for and therefore must use the Small Business 15-year CGT exemption under Subdivision 152-B of the Income Tax Assessment Act 1997 (ITAA 1997) to exempt entire capital gain on sale of the business?