Private ruling: In connection with the individual's retirement
Date of advice: 14 October 2025
Published: 1 December 2025
Ruling period: DD MM YYYY

Ruling: Q1: For the purposes of subparagraph 152-110(1)(d)(i) of the Income Tax Assessment Act 1997 , will the proposed CGT events in relation to the Company be in connection with the retirement of Person A? | A1: Yes

Relevant facts and circumstances: The Company was incorporated on DD MM YYYY. The Company operates businesses in both the xxx planning and xxx industries (Business 1 and Business 2). The Company is planning to sell the two businesses, involving the disposal of goodwill of both Business 1 and Business 2 ( the proposed CGT events ). The Company has owned each of the goodwill assets for at least 15 years. Person A has been the Director of the Company since its incorporation. They are paid by the Company by way of salary, with further dividends consistently paid to their Family Trust, which holds 100% of the shares entitled to dividends from the Company. Person A, as at DD MM YYYY, is xx years old and has consistently worked approximately xx hours a week in the Company during its existence. Person A intends to retire subsequent to the Company selling its two businesses, as the realisation of these assets provide the means for them and their partner to do so comfortably. To facilitate the transfer of Business 1 from the Company to its new owner, the sale contract will include clauses to reduce the hours of work to be undertaken by Person A each week. This reduction will be on the following terms: • first 6 months following the sale - 32 hours per week • 6-12 months following the sale - 24 hours per week • 12-18 months following the sale - 16 hours per week • 18-24 months following the sale - 8 hours per week. The sale contract for Business 2 will not include an employment relationship or contractual requirement to provide assistance as part of any transition to the new owner. Person A will cease to be involved in Business 2 upon execution of the sale contract. Person A is employed by a government agency, working on average less than one hour per week under that arrangement. This arrangement will continue until the end of the YYYY calendar year and will not be continued after that time.

Relevant legislative provisions: Income Tax Assessment Act 1997 subparagraph 152-110(1)(d)(i) Further issues for you to consider | We have limited our private ruling to the question raised in your application. There may be related issues that you should consider, including whether all other requirements to access the 15-year exemption in Subdivision 152-B have been satisfied, including the significant individual requirements in paragraphs 152-110(1)(c) and (d). | You may apply for another private ruling on this or any other matter.

Reasons for decision: Summary: Yes, the proposed CGT events will happen in connection with Person A's retirement. | Detailed Reasoning - Detailed reasoning: Subsection 152-110(1) of the Income Tax Assessment Act 1997 provides: 152-110(1) An entity that is a company or trust 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) the entity continuously owned the CGT asset for the 15-year period ending just before the CGT event; Note: Section 152-115 allows for continuation of the period if there is an involuntary disposal of the asset. (c) the entity 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 entity owned the CGT asset; (d) an individual who was a significant individual of the company or trust just before the CGT event either: (i) was 55 or over at that time and the event happened in connection with the individual's retirement; or (ii) was permanently incapacitated at that time. In connection with the individual's retirement 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. The Explanatory Memorandum to the New Business Tax System (Capital Gains Tax) Bill 1999makes the following comments about the requirement to be permanently incapacitated or retiring as one of the conditions for the concession: 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 provisions relating to the small business 15-year exemption do not define what is meant by the phrase 'in connection with the individual's retirement', nor do they give any indication of the degree of retirement required in order to take advantage of this concession. It could be argued that the phrase 'in connection with retirement' means that the capital gain arising from the disposal of active assets is to be used to provide funds for a person's retirement rather than to precipitate retirement at the time of the CGT event. The words used in the EM support this interpretation. The Advanced guide to capital gains tax concessions for small business 2013-14 also supports this view. It makes it clear that it is not necessary for there to be a permanent and everlasting retirement from the workforce. However, there would need to be at least a significant reduction in the number of hours worked or a significant change in the nature of the activities to be regarded as a retirement for the purposes of subparagraph 152-110(1)(d)(i). Application to your circumstances The Commissioner considers the proposed CGT events will be in connection with Person A's retirement. Although Person A will not completely stop working immediately, there will be a significant, and increasing reduction in the hours they work, as part of their intended transition to complete retirement. Furthermore, the proceeds from the sale of the two businesses will be used to provide funds for that retirement.