Private ruling: Small Business CGT Concessions
Date of advice: 6 January 2026
Published: 2 March 2026
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Landowners be able to satisfy the basic requirements under 152-10 of the Income Tax Assessment Act 1997 (ITAA 1997) to access the small business CGT concessions on the disposal of their interests in farming land? | A1: Yes | Q2: Will the Landowners be able to access the 15-year exemption in Subdivision 152-B of the ITAA 1997 on the disposal of their interests in the farming land? | A2: Yes

Relevant facts and circumstances: Background The Landowners purchased farming land in 19XX. The Landowners carry on a primary production business in Partnership on the Land. The Land has always been held as joint tenants by the Landowners. The Partnership carries on a business in the Partnership with a view to profit, and the Partners have jointly assented to be partners in the Partnership to share profits and losses equally and are jointly liable for the debts of the Partnership. Financial resources of the Partnership were used to acquire the Land. The Land is included as an asset in the financial statements of the Partnership and is an asset of the Partnership. There is a residence on the Land where the Landowners lived from 19XX until 20XX. The total area associated with the residence is approximately 1 hectare. During the period from 19XX to 19XX the Partnership used 100% of the Land to carry on a business of primary production. In 19XX, the Company was incorporated, with two ordinary shares on issue held by the Landowners. From this date, the Company commenced carrying on a farming business on part of the Land. In 20XX, the Landowners sold their shares in the Company to their son. The Partnership continued to carry on their primary production business of crop production on part of the Land. There is a formal lease agreement currently in place between the Partnership and the Company. The Company provides contract services to the Partnership in relation to planting, spraying and harvesting of the crops grown by the Partnership and the Partnership pays the Company commercial rates for the services provided. Neither of the Landowners carry on a business in their own right, or have any entities that are connected, or affiliated with them that carry on a business. The Landowners have been in discussions in the context of ceasing their business and disposing of the Land. The disposal of the Land would result in the Landowners retiring.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 152 | Income Tax Assessment Act 1997 Subdivision 152-A | Income Tax Assessment Act 1997 Subdivision 152-B | Income Tax Assessment Act 1997 subsection 152-10 | Income Tax Assessment Act 1997 subsection 152-10(1) | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-40 | Income Tax Assessment Act 1997 section 152-47 | Income Tax Assessment Act 1997 section 152-105 | Income Tax Assessment Act 1997 subparagraph 152-105(d)(i) | Income Tax Assessment Act 1997 subsection 328-110(1) | Income Tax Assessment Act 1997 section 328-120 | Income Tax Assessment Act 1997 section 328-125 | Income Tax Assessment Act 1997 section 328-130

Reasons for decision: Summary: The Landowners will be able to satisfy the basic requirements under 152-10 of the ITAA 1997 to access the small business CGT concessions on the disposal of their interests in the Land. | Detailed Reasoning - Small business capital gains tax concessions: To assist small businesses, Division 152 of the ITAA 1997 sets out four small business concessions which allow eligible taxpayers to disregard, reduce or defer certain capital gains tax obligations. To be eligible to apply the Division 152 concessions, the basic conditions for relief set out on Subdivision 152-A must be satisfied. Some of the concessions then have additional, specific conditions that must be satisfied. Basic conditions for the small business CGT concessions To qualify for the CGT small business concessions, you must satisfy several conditions that are common to all the concessions. Subsection 152-10(1) of the ITAA 1997 contains the following basic conditions you must satisfy to be eligible for the small business CGT concessions: (a) a *CGT event happens in relation to a *CGT asset of yours in an income year ... (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). To be eligible to apply the small business CGT concessions you must satisfy all four of the basic conditions above. Paragraph 152-10(1)(c) of the ITAA 1997, states that at least one of the requirements listed at subparagraphs (i) to (iv) must apply. CGT Small Business Entity To be considered a CGT small business entity in subparagraph 152-10(1)(c)(i) of the ITAA 1997, the entity needs to meet the following definition subsection 152-10(1AA): (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. Subsection 328-110(1) of the ITAA 1997 states: 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 $10 million; and (ii) your aggregated turnover for the current year is likely to be less than $10 million. Active asset test The fourth basic condition to be met is for the CGT asset to satisfy the active asset test in section 152-35 of the ITAA 1997. Subsection 152-35(1) of the ITAA 1997 states: A *CGT asset satisfies the active asset test if: ... (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 and a half years during the period specified in subsection (2). Subsection 152-35(2) of the ITAA 1997 states: The period: (a) begins when you *acquired the asset, and (b) ends at the earlier of: (i) the *CGT event; and (ii) if the relevant business ceased to be carried on in the 12 months before that time or any longer period that the Commissioner allows - the cessation of the business. Subsection 152-40(1) of the ITAA 1997 relevantly states: A *CGT asset is an active asset at a time if, at that time you: (a) own the asset (whether the asset is tangible or intangible) and it is used, or held ready for use, in the course of carrying on a *business that is carried on (whether alone or in partnership) by: (i) you; or (ii) your *affiliate; or (iii) another entity that is *connected with you; or (b) if the asset is an intangible asset - you own it and it is inherently connected with a business that is carried on (whether alone or in partnership) by you, your affiliate, or another entity that is connected with you. The active asset test is subject to the exclusions in subsection 152-40(4) of the ITAA 1997, under paragraph 152-40(4)(e) an asset whose main use is for deriving rent is specifically excluded from being an active asset. Under subsection 328-125(1) of the ITAA 1997 an entity is connected with another entity if: (a) one entity controls the other entity or (b) both entities are controlled by the same third entity. Under subsection 328-125(2) of the ITAA 1997: An entity (the first entity) controls another entity if the first entity, its *affiliates, or the first entity together with its affiliates: (a) except if the other entity is a discretionary trust - own, or have the right to acquire the ownership of, interests in the other entity that carry between them the right to receive a percentage (the control percentage) that is at least 40% of: (i) any distribution of income by the other entity; or (ii) if the other entity is a partnership - the net income of the partnership; or (iii) any distribution of capital by the other entity. | Detailed Reasoning - Application to the Landowners circumstances: Paragraph 152-10(1)(a) The Land will satisfy the definition of a CGT asset provided in subsection 108-5(1) of the ITAA 1997. Paragraph 152-10(1)(b) CGT event A1 will happen on the disposal of the Land (section 104-10 of the ITAA 1997). The event will result in a capital gain for the Landowners, but for the application of Division 152 of the ITAA 1997. Therefore, the first two basic conditions in section 152-10 of the ITAA 1997 are satisfied. Paragraph 152-10(1)(c) Paragraph 152-10(1)(c) of the ITAA 1997, states that at least one of the requirements listed at subparagraphs (i) to (iv) must apply. To satisfy subparagraph 152-10(1)(c)(iii) of the ITAA 1997, an entity must be a partner in a partnership that is a CGT small business entity for the income year, and the CGT asset must be an asset of the partnership. The Landowners are partners in the Partnership and the Land is an asset of the Partnership. Therefore, they will satisfy subparagraph 152-10(1)(c)(iii) of the ITAA 1997, if the Partnership is a CGT small business entity. An entity will be a CGT small business entity for an income year if it is carrying on a business in the income year (current year) and has an aggregated turnover of less than $2 million (subsection 152-10(1AA) of the ITAA 1997 and section 328-110). The Partnership was carrying on a business that had an annual turnover for the year ended 30 June 20XX under $2 million for the purposes of section 328-120 of the ITAA 1997. There are no other entities connected with the Partnership or affiliates of the Partnership or partners for the purposes of determining whether the Partnership is a CGT small business entity. Therefore, the aggregated turnover of the Partnership for the year ended 30 June 20XX, for the purposes of the test in section 328-110 of the ITAA 1997, will only include its own annual turnover as worked out under section 328-120. Therefore, the Partnership will be a CGT small business entity in the year ended 30 June 20XX, because: • it carried on a business in the year ended 30 June 20XX; and • its' aggregated turnover for the current year, worked out at the end of the year, will be less than $2 million (subsection 328-110(4) and 328-120(5)). Therefore, the Landowners will meet all of the conditions of subparagraph 152-10(1)(c)(iii) of the ITAA 1997. 152-10(1)(d) - Active asset test During the period between 19XX and 19XX the Land was used or held ready for use in the course of carrying on a business, that was carried on by the Partnership. The Landowners are connected to the Partnership under subsection 328-125(2) of the ITAA 1997 having received at least 40% of the net income of the Partnership. During the period between 19XX and 20XX the Land was used or held ready for use in the course of carrying on a business, that was carried on by the Company. The Landowners were connected to the Company during that time, under paragraph 328-125(2)(b) of the ITAA 1997 having owned the equity interests in the Company during that time that carried between them the right to exercise, or control the exercise of, a percentage that was at least 40% of the voting power in the Company. The combined effect of sections 152-35 and 152-40 of the ITAA 1997 is that the Land will meet the active asset test as it was used, or held ready for use, in the course of carrying on a business, that was carried on by the Partnership and the Company, for at least 7 and a half years and it was owned by the Landowners for more than 15 years. Conclusion on basic conditions In conclusion, the Landowners will satisfy all of the basic conditions for small business relief under section 152-10 of the ITAA 1997 on the disposal of their interests in the Land. | Summary: The Landowners will be able to access the 15-year exemption in Subdivision 152-B of the ITAA 1997 on the disposal of their interests in the Land. | Detailed Reasoning - Detailed reasoning: Small business 15 year exemption Under section 152-105 of the ITAA 1997, you can disregard any capital gain arising from the disposal of the asset, if all of the following conditions are satisfied: (a) the basic conditions in Subdivision 152-A of the ITAA 1997 are satisfied for the gain; (b) you continuously owned the CGT asset for the 15-year period ending just before the CGT event; ... (d) either: (i) you are 55 or over at the time of the CGT event and the event happens in connection with your retirement; or (ii) you are permanently incapacitated at the time of the CGT event. Regarding the connection with retirement, for the purposes of subparagraph 152-105(d)(i) of the ITAA 1997, both the Landowners have been in discussions in the context of ceasing their business and disposing of the Land. The disposal of the Land would result in the Landowners ceasing their Partnership business and retiring. Therefore, it is accepted that the disposal of the Land will happen in connection with the retirement of the Landowners for the purposes of subparagraph 152-105(d)(i). Conclusion In regard to section 152-105 of the ITAA 1997: • the basic conditions in Subdivision 152-A of the ITAA 1997 will be satisfied for the gain. • The Landowners owned an interest in the Land for over 15 years. • The Landowners are over 55 years of age, and the event will happen in connection with their retirement. As a result, the Landowners satisfy the conditions for the 15-year exemption and can disregard any capital gain they will make on the disposal of the Land.