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1 Did the change from a Crown lease to freehold interest cause a capital gains tax ("CGT") event in Division 104 of the Income Tax Assessment Act 1997 ("ITAA 1997") to happen in respect of your beneficial interests in the Land?

1 No Question 2 Did the change from Crown lease to freehold interest cause a CGT event under Division 104 of the ITAA 1997 to happen in respect of your legal interests in the Land? Answer 2 Yes Question 3 If the answer to question 2 is yes, were you entitled to the CGT roll-over relief under section 124-575 of the ITAA 1997? Answer 3 Yes Question 4 If the answer to question 3 is yes, for the purpose of section 152-35 of the ITAA 1997 (the "active asset test") and the purpose of Subdivision 152-B (the 15-year exemption), is the date of acquisition of your original 50% freehold interest in the Land taken to be the date when the Crown lease was acquired under item 2 of the table in subsection 115-30(1)? Answer 4 No Question 5 Does the CGT roll-over under section 126-5 of the ITAA 1997 apply in relation to the transfer to you of your former spouse's 50% interest in the Land? Answer 5 Yes Question 6 Are the basic conditions under Subdivision 152-A of the ITAA 1997 satisfied for the capital gains you made when you sold the Land? Answer 6 Yes Question 7

If the answer to question 6 is 'yes', for the purpose of the 15-year exemption in Subdivision 152-B of the ITAA 1997, does subsection 152-115(2) apply to treat the date you acquired your former spouse's interest in the Land as the date when the Crown Lease was acquired? Answer 7 No Question 8 Are the specific conditions for the 15-year exemption in Subdivision 152-B of the ITAA 1997 satisfied in relation to the sale of the Land? Answer 8 No This ruling applies for the following period : Income tax year ended 30 June 20XX The scheme commence on: DDMMYYYY

On DDMMYYYY, you and your former spouse purchased a perpetual lease (the "Crown Lease") over Crown land in your state (the "Land"). You and your former spouse paid $X to purchase the Crown Lease. You and your former spouse applied to convert the Crown lease to freehold land (also known as "estate in fee simple") tenure. A State titles registry search (the "title search") in respect of the Land shows a registered 'Deed of Grant of Land' stating that Elizabeth the Second, Queen of Australia: "with the advice of the Executive Council, under the Land Act 1994, grant in fee simple all that parcel of land described in Item 1 to the person described in Item 2...". The Land estate in fee simple relates to the same land as the Crown Lease. You and your former spouse divorced. Your former spouse's interest in the Land freehold was transferred to you pursuant to Court orders under the Family Law Act 1975. You entered into a contract of sale (the "Contract") to sell the Land on DDMMYYYY. The purchase price for the sale is $X. You intend to make the choice provided under subsection 152-45(2) of the ITAA 1997 by the day you lodge your income tax return for the 20XX-XX income year.

You have operated a cattle grazing and agistment business on the Land since you and your former spouse acquired the Crown Lease. In the 20XX-XX and 20XX-XX income years, Company A was connected with you and carried on business. No other entities related to you carried on business. For the 20XX-XX income year, your annual turnover was $X and Company A's annual turnover was $X.

Income Tax Assessment Act 1997 Division 104 section 104-10 subsection 104-10(3) section 104-25 subsection 108-5(1) section 108-7 Subdivision 109-A subsection 109-5(1) subsection 109-5(2) section 109-55 section 115-30 subsection 115-30(1) Subdivision 124-A Subdivision 124-J section 124-575 subsection 124-575(1) subsection 124-575(2) paragraph 124-575(2)(d) section 124-580 Subdivision 126-A section 126-5 paragraph 126-5(1)(a) subsection 126-5(2) Division 152 Subdivision 152-A Subdivision 152-B section 152-10 subsection 152-10(1) paragraph 152-10(1)(a) paragraph 152-10(1)(b) subparagraph 152-10(1)(c)(i) paragraph 152-10(1)(d) subsection 152-10(1AA) section 152-35 subsection 152-35(1) subsection 152-35(2) subsection 152-40 subsection 152-40(1) section 152-45 subsection 152-45(2) section 152-10

Question 1 Detailed reasoning Division 104 of the ITAA 1997 details all the CGT events under which you can make a capital gain or loss, including: •                 CGT event A1 (section 104-10), about disposal of a CGT asset, and •                 CGT event C2 (section 104-25), about ownership of an intangible CGT asset ending by, among other things, being surrendered. 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), including part of, or an interest in, an asset referred to in subsection (1) (subsection 108-5(2)). Where individuals own a CGT asset as joint tenants, they are treated as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common (section 108-7 of the ITAA 1997). The term "intangible CGT asset" is not defined in the ITAA 1997. Consequently, the word "intangible" takes its ordinary meaning. An intangible asset is often referred to as "an asset that lacks a physical presence or form" . CGT event A1 - legal ownership and beneficial ownership

In certain circumstances, an asset may be legally owned by one entity (or group of entities) and may be beneficially owned by a different entity (or group of entities). As a general rule, if you are not the beneficial owner of a CGT asset then, you cannot make a capital gain or loss from a CGT event happening in relation to the asset (see Saunders and Another v Deputy Commissioner of Taxation [2010] WASC 261; (2010) 80 ATR 549, where the taxpayer made a valid declaration of trust over the relevant property and could not be liable to CGT on disposal of the property as the beneficial interest was held by the trust). For the purpose of CGT event A1, you dispose of an asset if a change of ownership occurs from you to another entity (subsection 104-10(2) of the ITAA 1997). However, the subsection goes on to say that: "... a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner."

For example, if a taxpayer transfers an asset to another entity and that entity holds the asset in trust for the taxpayer, although the legal ownership of the asset changes, the beneficial ownership does not change. Similarly, if an asset is held in trust and a new trustee is appointed, the legal ownership of the assets of the trust changes but there is no change in the beneficial ownership. What is a lease? The Review of Business Taxation, A Platform for Consultation , Discussion Paper 2 Volume I, February 1999 (page 217, paragraph 8.1), as cited in ATO Interpretative Decision ATO ID 2007/93 Income Tax Capital Allowances: business related costs - limitation of deduction - lease or other legal or equitable right, explained: Leases and rights are essentially arrangements for transferring some, or all, of the benefits of ownership of an asset from the owner to the recipient of the lease or right.

Generally, when granting a land lease, the landowner (the "lessor") grants to the lease recipient (the "lessee" or "leaseholder") the rights to exclusive possession and use of the land, typically for a specified period. The right to exclusive possession does not transfer land ownership to the leaseholder, but generally means they have the right to exclude others from accessing or using the land. A perpetual lease, or a lease granted "in perpetuity", generally continues for an indefinite period or forever. A Crown lease is a lease granted over Crown land. In your State, Crown land is the land that was vested in the Crown on settlement of the State that remains the property of the Crown. It is often referred to as State land and is managed under the Land Act. Leases issued over State land are normally subject to a range of conditions relating to the use, control and transfer of the land (Department of Natural Resources and Mines (2014) Queensland state land- Strengthening our economic future. Discussion paper , https://cabinet.qld.gov.au/ documents/2014/may/qldstateland/Attachments/Paper.pdf)

The term "Crown lease" is defined in section 124-580 of the ITAA 1997, for the purpose of the CGT roll-over in Subdivision 124-J, as follows: 124-580 Meaning of Crown lease A Crown lease is: (a) a lease of land granted by the Crown under an *Australian law (other than the common law); or (b) a similar lease granted under a *foreign law. For income tax purposes, the term "Australian law" is defined to include a "State law", and "State law" is defined to mean a 'law of a State' (subsection 995-1(1) of the ITAA 1997). What CGT asset did you own prior to converting the Crown Lease? On DDMMYYYY, you and your former spouse acquired interests in the Land, as joint owners. At that time, the Land was Crown Land for which the Crown had granted a perpetual lease (the "Crown Lease"). Throughout the duration of the Crown Lease: •                 the Crown owned the Land, and •                 you and your former spouse owned the Crown Lease (as the "leaseholders" or "lessees") and your interests in the Land were leasehold interests.

The Crown Lease comprised of both the legal and beneficial leasehold interests in the Land. As you and your former spouse owned both the legal and beneficial leasehold interests, they were not separate CGT assets from the Crown Lease itself. The interests were not separately held, that is, they were not held: •                 by another entity for the benefit of you and your former spouse, or •                 by you and your former spouse for the benefit of another entity. For CGT purposes, as joint owners of the Crown Lease, you and your former spouse were each treated as if you owned a CGT asset that comprised an equal (50%) interest in the Crown Lease (section 108-7 of the ITAA 1997). CGT and surrender of a lease Taxation Ruling TR 2005/6 Income tax: lease surrender receipts and payments (TR 2005/6) discusses the CGT consequences in relation to the surrender of a lease.

In the Commissioner's view (TR 2005/6, paragraph 4, 10 and 42), under the CGT regime, the surrender of a lease by a lessee constitutes both disposal of a CGT asset (CGT event A1) and the ending of contractual rights under the lease (CGT event C2). For the lessee, CGT event A1 is considered to be the more relevant event as there is a change of ownership when the leasehold rights revert to the lessor (paragraphs 85-95 and footnote F8). As stated in paragraph 91: "91. Based on the authorities, we accept that a lease surrender operates to convey or transfer the lease from the lessee to the lessor irrespective of whether there is an express surrender or surrender by operation of law. Consequently, for CGT purposes, the lessor acquires a CGT asset being the lease ..." In other words, on surrender of a lease, the lessee disposes of the lease. The CGT regime specifically deals with conversion of a Crown lease by providing a replacement-asset roll-over (Subdivision 124-J of the ITAA 1997). You are automatically entitled to the full roll-over if the requirements in section 124-575 are satisfied.

Section 124-575 of the ITAA 1997 uses the term "original right" when referring to the original asset, the Crown lease, which must expire or be surrendered as a condition of the roll-over (paragraph 124-575(1)(b)). The term "new right" is used when referring to the replacement asset, which: •                 must be either one or more new Crown leases over land, or one or more estates in fee simple in land (paragraph 124-575(1)(c)), •                 must relate to the same land as the Crown lease (paragraph 124-575(1)(d)), and •                 must have been granted in one of the eight ways listed in subsection 124-575(2), which includes by "converting the original right to an estate in fee simple" (paragraph 124-575(2)(d)). The word "converting" is not defined for the purpose of paragraph 124-575(2)(d) of the ITAA 1997 so takes its ordinary meaning as the present participle of the word "convert". The Australian Oxford Dictionary (2 ed.) (Oxford University Press (2004) online, www.oxfordreference.com, accessed 19 August 2025) provides the following definition of the word "convert": convert - verb /kənˈvə:t/ 1. [ tr. ] [usu. foll. by into ] change in form, character, or function.

2. ... 3. [ tr. ] change (moneys, stocks, units in which a quantity is expressed, etc.) into others of a different kind. The Macquarie Dictionary (Pan Macmillan Australia (2025) online, www.macquariedictionary.com.au, accessed 19 August 2025) provides the following definition of the word "convert": convert verb /kənˈvɜt/ ( say kuhn'vert) - verb ( t ) 1. to change into something of different form or properties; transmute; transform... 9. to exchange for an equivalent: to convert banknotes into gold. 10. to change stocks or debentures into others of a different type. Based on the definitions, above, it is considered that the word "converting" in paragraph 124-575(2)(d) of the ITAA 1997, is not intended to mean transforming or transmuting the Crown lease from one state to another, such that the Crown Lease still exists after the conversion. For CGT purposes, it is considered that "converting the original right to an estate in fee simple" in paragraph 124-575(2)(d) of the ITAA 1997, in circumstances involving converting a State Crown Lease, can be interpreted consistently with those actions undertaken pursuant to the Land Act, including:

•                 the Crown lease being taken as having been surrendered (subsection 172(6) of the Land Act); and •                 the freehold land being issued as a "new tenure" (refer paragraphs 166(1)(a) and 172(1)(a) of the Land Act). For the purpose of paragraph 124-575(2)(d), it is considered that "converting the original right to an estate in fee simple" involves exchanging the leasehold in the Land for the freehold in the Land, which encompasses: •                 the Lessee surrendering ownership of the Crown lease, including both the legal and beneficial leasehold interests, when the leasehold rights revert to the Lessor; and •                 the issue of a new "estate in fee simple" tenure, comprising different, freehold ownership rights. For CGT purposes, in circumstances where the legal owners of a Crown lease hold both the legal and beneficial leasehold interests at the time the Crown lease is surrendered (or taken to be surrendered), there is nothing in Subdivision 124-J of the ITAA 1997 or elsewhere in the CGT regime to suggest that the legal leasehold interests end but the beneficial leasehold interests continue.

Did a CGT event happen in respect of your beneficial interest in the Land? Prior to the conversion of the Crown Lease, your beneficial interest in the Land was a leasehold interest under the Crown Lease. When the Crown Lease was taken to be surrendered under the Land Act, the Crown Lease was the relevant CGT asset, which comprised of both the legal and beneficial leasehold interest as they were not separately held. At this time there was a change in ownership of the Crown Lease, from you and your former spouse to the Crown, as the leasehold interests and rights reverted to the Crown. Applying the view in TR 2005/6, CGT event A1 (section 104-10 of the ITAA 1997) happened in respect of your 50% interest in the Crown Lease when the Crown Lease was taken to have been surrendered and you ceased to be the legal and beneficial owners of the leasehold interests. You and your former spouse did not continue to be the beneficial owners of the Crown Lease or the leasehold interests. The change from the Crown Lease to freehold interest did not cause an additional or separate CGT event to happen in respect of your beneficial leasehold interests. Question 2 Detailed reasoning

Refer to question 1 for the detailed reasoning in relation to this question. Prior to the conversion of the Crown Lease, your legal interest in the Land was the leasehold interest under the Crown Lease. When the Crown Lease was taken to be surrendered under the Land Act, the Crown Lease was the relevant CGT asset comprised of both the legal and beneficial leasehold interest as they were not separately held. At this time there was a change in ownership of the Crown Lease, from you and your former spouse to the Crown, as the leasehold interests and rights reverted to the Crown. Applying the view in TR 2005/6, CGT event A1 (section 104-10 of the ITAA 1997) happened in respect of your 50% interest in the Crown Lease when the Crown Lease was taken to have been surrendered and you ceased to be the legal and beneficial owners of the leasehold interests. You and your former spouse did not continue to be the beneficial owners of the Crown Lease. The change from the Crown Lease to freehold interest did not cause an additional or separate CGT event to happen in respect of your beneficial leasehold interests. Question 3 Detailed reasoning

As discussed in question 1, section 124-575 of the ITAA 1997, provides an automatic replacement-asset roll-over in relation to Crown leases if: •                 you hold a Crown lease over land (as defined in section 124-580) and it is surrendered, •                 you are granted a "new right" that is an estate in fee simple in land, •                 the new right relates to the same land as the Crown lease; and •                 the new right is granted to you by converting the original Crown lease to an estate in fee simple (paragraph 124-575(2)(d)). In your circumstances: •                 You and your former spouse held the Crown Lease as joint tenants. •                 It is accepted that the Crown Lease satisfied the definition in section 124-580 of the ITAA 1997. •                 You and your former spouse were taken to have surrendered the Crown Lease under subsection 172(6) of the Land Act. •                 You and your former spouse were granted the estate in fee simple in the Land. •                 The estate in fee simple relates to the same land as the Crown Lease.

•                 The estate in fee simple was granted to you by converting the Crown Lease to the estate in fee simple. As all the requirements of section 124-575 of the ITAA 1997 are satisfied you are entitled to the automatic replacement-asset roll-over in that section. Question 4 Detailed reasoning Subdivision 109-A of the ITAA 1997 sets out the general acquisition rules for CGT purposes. In general, you acquire a CGT asset when you become its owner (subsection 109-5(1)). More specifically, as set out in the table in subsection 109-5(2), if another entity disposes of a CGT asset to you (except if you compulsorily acquire it), you acquire the asset: •                 when the disposal contract is entered into, or •                 if there is no disposal contract, when the other entity stops being the assets owner. Other acquisition rules may override the general rules as set out in the table in section 109-55 of the ITAA 1997. However, as stated in the section: " 109-55 ... Some of the rules have effect only for limited purposes." Table 1 Item 8C of the table in section 109-55 of the ITAA 1997 is as follows Other acquisition rules Item In these circumstances:

You acquire the asset at this time: See: ... 8C You obtain a replacement-asset roll-over (other than a roll-over covered by section 115-34) for replacing a CGT asset when you acquired the original asset involved in the roll-over section 115-30 Section 115-30 of the ITAA 1997 provides a table with special rules about the time of acquisition for the purpose of the discount capital gains (CGT Discount) provisions. Immediately before the table, subsection 115-30(1) states: " 115-30(1) Sections 115-25, 115-40, 115-45, 115-105, 115-110 and 115-115 (the affected sections ) apply as if an entity (the acquirer ) had acquired a *CGT asset described in an item of the table at the time mentioned in the item: ..." Further, the heading of the second column of the table in subsection 115-30(1) of the ITAA 1997 specifies that: "The affected sections apply as if the acquirer had acquired this CGT asset: " [Emphasis added] Section 115-30(1A) of the ITAA 1997 also specifically relates to item 2 of the table in subsection (1) and states: " 115-30(1A)

For the purposes of sections 115-105, 115-110 and 115-115, item 2 of the table in subsection (1) applies in relation to all *replacement-asset roll-overs, including those covered by paragraph 115-34(1)(c)." Item 2 of the table in subsection 115-30(1) of the ITAA 1997 has limited application. Consequently, when determining the acquisition date of Freehold Interest 1 for the purpose of the active asset test (section 152-35) and the 15-year exemption (Subdivision 152-B), item 2 of the table in subsection 115-30(1) does not apply to override the general acquisition rules. For the purposes of the active asset test and the 15-year exemption, the acquisition date of your original 50% interest in the Land freehold is when the Crown stopped being the owner of the freehold, when your freehold interest was registered. Question 5 Detailed reasoning Section 126-5 of the ITAA 1997 provides an automatic CGT roll-over in relation to marriage or relationship breakdowns. The roll-over will apply if CGT event A1 happens involving an individual and their former spouse because of a court order under the Family Law Act 1975 (paragraph 126-5(1)(a) and subsection (2)).

Your former spouse was instructed by Court orders under the Family Law Act 1975 , to transfer their interest in the Land to you. CGT event A1 happened in respect of the transfer. As the requirements in section 126-5 of the ITAA 1997 are satisfied, the CGT roll-over in that section automatically applies in relation to the transfer to you of your former spouse's 50% interest in the Land. Question 6 Detailed reasoning Subdivision 152-A of the ITAA 1997 sets out the basic conditions for small business CGT relief under Division 152. Relevantly, a capital gain you make may be reduced or disregarded under the Division if the following basic conditions are satisfied for the gain (subsection 152-10(1)): (a)             a CGT event happens in relation to a CGT asset of yours in an income year; (b)             the CGT event would (apart from any relief given under Division 152) result in a capital gain; (c)             at least one of the following applies: (i)               you are a *CGT small business entity for the income year; ... (d)             the CGT asset satisfies the active asset test (see section 152-35).

If you acquire another interest in an asset in which you already own an interest, the interests remain separate CGT assets for capital gains purposes and there is a separate date of acquisition for each interest (paragraphs 1 and 3 of Taxation Determination TD 2000/31: if you own an interest in a CGT asset and you acquire another interest in that asset, do the interests remain separate CGT assets for capital gains purposes or do they become a single asset? (TD 2000/31)). In your circumstances, you and your former spouse were registered as the joint owners of the Land freehold in 20XX, and your former spouse transferred their interest to you in 20XX. Applying the Commissioner's view in TD 2000/31, on acquiring your former spouse's interest in the Land, you held two separate CGT assets: •                 Freehold Interest 1, your original 50% freehold interest in the Land, and •                 the 50% interest that your former spouse transferred to you in 20XX ("Freehold Interest 2"). Paragraphs 152-10(1)(a) and (b)

Section 104-10 of the ITAA 1997 provides that CGT event A1 happens when you enter into a contract for the disposal of a CGT asset. You make a capital gain from the CGT event if the capital proceeds from the disposal are more than the asset's cost base. In your circumstances: •                 You entered into a contract of sale to sell the Land on DDMMYYYY. •                 As both Freehold Interest 1 and Freehold Interest 2 were sold, two separate CGT events under section 104-10 of the ITAA 1997 happened. •                 The price you paid to acquire the Crown Lease in 20XX was $X and the price in the contract of sale in 20XX was $X. •                 Although there may be other costs included in the cost bases of your two CGT assets, it is accepted that, apart from any concessions to which you may be entitled under Division 152, the disposals resulted in capital gains. As such, the requirements in paragraphs 152-10(1)(a) and (b) are satisfied for the gains from your sale of Freehold Interest 1 and Freehold Interest 2. Subparagraph 152-10(1)(c)(i) - CGT small business entity for the income year

You are a "CGT small business entity" for an income year (subsection 152-10(1AA) of the ITAA 1997) 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. Section 328-110 of the ITAA 1997 provides a number of ways in which you can be a small business entity. In relation to the 20XX-XX income year, under that section, you would be a "small business entity" for the year if: •                 you carried on business in the 20XX-XX income year; and •                 you also carried on business in the 20XX-XX income year; and •                 your aggregated turnover for the 20XX-XX income year was less than $10 million (see subparagraph 328-110(1)(b)(i)). As defined in section 328-115 of the ITAA 1997, your "aggregated turnover" for an income year is the sum of the following annual turnovers, excluding any of the amounts in subsection 328-115(3): •                 your annual turnover for the income year; and

•                 the annual turnover for the income year of any entity that is "connected with" you at any time during the income year; and •                 the annual turnover for the income year of any entity that is your "affiliate" at any time during the income year. An entity's "annual turnover" for an income year is the total ordinary income that the entity derives in the income year in the ordinary course of carrying on business (subsection 328-120(1) of the ITAA 1997), excluding any of the amounts in subsections 328-120(2) to (4). An "affiliate" of an entity is an individual or company that acts or could reasonably be expected to act in accordance with the entity's directions or wishes, or in concert with the entity, in relation to the affairs of the individual or company's business (subsection 328-130(1)). An entity is "connected with" another entity if: (a) either entity controls the other entity in a way described in section 328-125 of the ITAA 1997; or (b) both entities are controlled by the same third entity in a way described in section 328-125 (subsection 328-125(1)).

In section 328-125 of the ITAA 1997, subsection (2) describes how an entity has direct control of an entity that is not a discretionary trust, as follows: 328-125(2) 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 ... 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; or (b)             if the other entity is a company - own, or have the right to acquire the ownership of, *equity interests in the company that carry between them the right to exercise, or control the exercise of, a percentage ... that is at least 40% of the voting power in the company. Were you a CGT small business entity for the 20XX-XX income year?

You carried on your business in both the 20XX-XX and 20XX-XX income years. As such: •                 if your aggregated turnover for the 20XX-XX year was less than $10 million, you were a "small business entity" for the 20XX-XX income year; and •                 if your aggregated turnover for the 20XX-XX year was less than $2 million, you were a "CGT small business entity" for the 20XX-XX income year. In respect of the 20XX-XX income year, although you were associated with various entities, the only one of those entities that carried on business in the year was Company A (the "Company"). As such, if the Company was "connected with" you in a way described in section 328-125 for that year, its annual turnover must be added to your annual turnover in calculating your aggregated turnover for the year. As you owned more than 40% of the voting equity interests in the Company in the 20XX-XX income year: •                 pursuant to paragraph 328-125(2)(b) of the ITAA 1997, you controlled the Company for that year, and •                 pursuant to subsection 328-125(1), the Company was "connected with" you for that year.

For the 20XX-XX income year, your annual turnover was $X and the Company's annual turnover was $X, giving you an aggregated turnover of $X. As you carried on business in both the 20XX-XX and 20XX-XX income years and your aggregated turnover for the 20XX-XX income year was less than $2 million, pursuant to subsection 152-10(1AA) and subparagraph 328-110(1)(b)(i) of the ITAA 1997, you were a CGT small business entity for the year and the requirement in subparagraph 152-10(1)(c)(i) is satisfied. Paragraph 152-10(1)(d) - the active asset test A CGT asset satisfies the active asset test in subsection 152-35(1) of the ITAA 1997, if: (a) you owned the asset for 15 years or less and the asset was an *active asset of yours for a total of at least half of the period specified in subsection (2); or (b) you owned the asset for more than 15 years and the asset was an active asset of yours for a total of at least 7½ years during the period specified in subsection (2). Relevantly, subsection 152-35(2) of the ITAA 1997 provides that the period begins when you acquired the asset; and ends at the CGT event. The term "active asset" is defined in subsection 152-40(1) of the ITAA 1997 as follows:

A *CGT asset is an active asset at a time if, at that time: (a)             you 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 ... Acquisition of CGT assets As discussed in question 4 (above), under the general acquisition rules, you acquire a CGT asset when you become its owner (subsection 109-5(1) of the ITAA 1997), or more specifically in most disposal cases: •                 when the disposal contract is entered into, or •                 if there is no disposal contract, when the other entity stops being the assets owner. Other rules may override the general rules as set out in the table in section 109-55 of the ITAA 1997, however, some of those rules have effect only for limited purposes. Items 6, 7 and 8C of the table in section 109-55 involve circumstances where the asset owner obtained a replacement asset roll-over, as shown below: Table 2 Other acquisition rules Item

In these circumstances: You acquire the asset at this time: See: ... 6 You obtain a replacement-asset roll-over for replacing an asset you acquired before 20 September 1985 before 20 September 1985 Divisions 122 and 124 ... 7 You obtain a replacement-asset roll-over for a Crown lease, or a prospecting or mining entitlement that is renewed or replaced and part of the new entitlement relates to a part of the old one that you acquired before 20 September 1985 before 20 September 1985 (for that part of the new entitlement that relates to the pre-CGT part of the old one) sections 124-595 and 124-725 ... 8C You obtain a replacement-asset roll-over (other than a roll-over covered by section 115-34) for replacing a CGT asset when you acquired the original asset involved in the roll-over section 115-30 Also, section 152-45 of the ITAA 1997 provides other rules that override the general acquisition rules for the purpose of the small business concessions in Division 152. These rules apply for involuntary disposals such as: •                 if a replacement asset is acquired due to an asset being compulsorily acquired, lost or destroyed; or

•                 if an asset was acquired as a result of marriage or relationship breakdown. Under subsection 152-45(2) of the ITAA 1997, if you were the transferee of a CGT asset for which there has been a roll-over under Subdivision 126-A (about marriage or relationship breakdown), then you may choose that the active asset test in section 152-35 applies as if: (a) you had acquired the asset when the transferor acquired the asset; and (b) the asset had been an active asset of yours at the times when the asset was an active asset of the transferor; and (c) the asset had not been an active asset of yours at the times when the asset was not an active asset of the transferor. For the purpose of the active asset test, when did you acquire Freehold Interest 1? In your circumstances, and as determined in the questions above: •                 On DDMMYYYY, you and your former spouse acquired the Crown Lease. •                 In converting the Crown Lease, in 20XX, the Crown granted you and your former spouse the Land freehold. •                 The Crown Lease was taken to have been surrendered when your new freehold interests were registered.

•                 You are entitled to the roll-over in section 124-575 of the ITAA 1997. As you did not acquire the Crown Lease, or part of it, before 20 September 1985, the rules in items 6 and 7 of the table in section 109-55 of the ITAA 1997 do not apply in relation to Freehold Interest 1. As the rule in item 8C of the table only applies in relation to the "affected sections" listed in subsection 115-30(1) it does not apply for the purpose of subsection 152-35(1) and the active asset test. Section 152-45 of the ITAA 1997 does not apply in relation to Freehold Interest 1 as you did not become its owner because of an involuntary disposal. In the absence of a disposal contract, pursuant to subsection 109-5(2) of the ITAA 1997, you acquired Freehold Interest 1 when you and your former spouse were registered as the joint owners of the Land freehold and the Crown ceased being the owner of the Land, in MMM 20XX. For the purpose of the active asset test, when did you acquire Freehold Interest 2? Further to the circumstances set out above in relation to Freehold Interest 1:

•                 You and your former spouse divorced in 20XX, and the Court ordered your former spouse to transfer their interest in the Land to you. •                 The automatic roll-over in Subdivision 126-A of the ITAA 1997 applied in respect of the transfer. •                 You intend to make a choice under subsection 152-45(2) of the ITAA 1997 by the day you lodge your income tax return for the 20XX-XX income year. As with Freehold Interest 1, the rules in items 6, 7 and 8C of the table in section 109-55 of the ITAA 1997 do not apply in relation to Freehold Interest 2 for similar reasons. As such, your former spouse acquired their interest in Freehold Interest 2 at the same time you acquired Freehold Interest 1, in MMM 20XX. For Freehold Interest 2, as you intend to make a choice under subsection 152-45(2) of the ITAA 1997 in relation to the interest, pursuant to that section, although you actually acquired it from your former spouse in 20XX, the active asset test will apply as if you had acquired the interest when your former spouse acquired it, in MMM 20XX. Do Freehold Interest 1 and Freehold Interest 2 satisfy the active asset test?

Given the above acquisition dates, the relevant period for the active asset test for both Freehold Interest 1 and Freehold Interest 2 is from MMM 20XX to DDMMYYYY. As you used the Land in the course of carrying on your business for the whole of that period, both Freehold Interest 1 and Freehold Interest 2 satisfy the active asset test, and the requirement in paragraph 152-10(1)(d) is satisfied. Conclusion - Are the basic conditions satisfied for the capital gain? As the requirements in subsection 152-10(1) of the ITAA 1997 are satisfied, the basic conditions for relief under Division 152 are satisfied for the gains you made when you disposed of Freehold Interest 1 and Freehold Interest 2. Question 7 Summary No. For CGT purposes, under the general acquisition rules in Subdivision 109-A of the ITAA 1997, you and your former spouse acquired your jointly held interests in the Land freehold when you were registered as the joint owners of the freehold in MMM 20XX, and the Crown ceased to be the landowner.

By making the choice in 152-45(2) of the ITAA 1997, pursuant to subsection 152-115(2), when determining whether you continuously owned Freehold Interest 2 for the requisite 15-year period, paragraph 152-105(b) applies as if you had acquired the interest when your former spouse acquired it, in MMM 20XX. Subsection 152-115(2) of the ITAA 1997 does not apply to treat the date you acquired Freehold Interest 2 as the date when the Crown Lease was acquired. Detailed reasoning Subsection 152-115(2) of the ITAA 1997 establishes that: If you made the choice mentioned in subsection 152-45(2) for a *CGT asset, then paragraphs 152-105(b) and (c) and 152-110(1)(b) and (c) (the 15-year and significant individual rules) apply as if you had acquired the asset when the transferor acquired it. For individuals, paragraph 152-105(b) of the ITAA 1997 requires that you continuously owned the relevant CGT asset for the 15-year period ending just before the CGT event. The other paragraphs mentioned in subsection 152-115(2) apply if an individual owns a CGT asset that is a share in a company or an interest in a trust; or if you are a company or trust. As such, they do not apply in your circumstances.

As discussed in question 6 in relation to the active asset test, subsection 152-45(2) of the ITAA 1997 provides rules that override the general acquisition rules for the purpose of the small business concessions in Division 152 in respect of involuntary disposals due to marriage or relationship breakdown for which there has been a roll-over under Subdivision 126-A. As previously discussed, the rules in items 6 and 7 of the table in section 109-55 of the ITAA 1997 do not apply to Freehold Interest 2 as the Crown Lease was not acquired before 20 September 1985. Further, the rule in item 8C of the table in section 109-55, detailed in subsection 115-30(1), only applies for the purpose of the "affected sections" listed in subsection 115-30(1). It does not apply for the purpose of the 15-year exemption. Under the general acquisition rules, the date your former spouse acquired Freehold Interest 2 is the date your joint ownership of the Land freehold was registered, in MMM 20XX.

Despite the ownership of Freehold Interest 2 changing from your former spouse to you in 20XX, as you intend to make a choice pursuant to subsection 152-45(2) of the ITAA 1997 in respect of the interest, then pursuant to subsection 152-115(2), paragraph 152-105(b) will apply as if you had acquired the interest when your former spouse acquired it, in MMM 20XX. Subsection 152-115(2) of the ITAA 1997 does not apply to treat the date you acquired Freehold Interest 2 as the date when the Crown Lease was acquired. Question 8 - Are the specific conditions for the 15-year exemption in Subdivision 152-B of the ITAA 1997 satisfied in relation to the sale of the Land? Summary No. For the purpose of paragraph 152-10(b) of the ITAA 1997, both Freehold Interest 1 and Freehold Interest 2 were acquired (or were taken to have been acquired) in MMM 20XX. Consequently, you did not continuously own either interest for the 15-year period ending just before the Land sale on DDMMYYYY. As the condition in paragraph 152-105(b) is not satisfied, the specific conditions for the 15-year exemption in Subdivision 152-B are not satisfied. Detailed reasoning

For individuals, section 152-105 of the ITAA 1997 sets out the additional conditions to be satisfied for entitlement to the 15-year exemption in Subdivision 152-B, including that you must have continuously owned the CGT asset for the 15-year period ending just before the CGT event (paragraph 152-105(b)). Pursuant to subsection 104-10(3) of the ITAA 1997, the CGT events that happened when you sold Freehold Interest 1 and Freehold Interest 2 happened when you entered into the contract of sale on DDMMYYYY. As such, to satisfy the requirement in paragraph 152-105(b), you must have owned the interests from DDMMYYYY. Under the general acquisition rules in Division 109-A of the ITAA 1997, you acquired Freehold Interest 1 when you and your former spouse were registered as the joint owners of the Land freehold, in MMM 20XX, and the Crown ceased being the owner of the Land. As previously discussed, no other acquisition rules override the general rules in relation to Freehold Interest 1.

In relation to Freehold Interest 2, despite ownership of the interest changing in 20XX, as you will make a choice pursuant to subsection 152-45(2) of the ITAA 1997 in respect of the interest, pursuant to subsection 152-115(2), paragraph 152-105(b) will apply as if you had acquired the interest when your former spouse acquired it. Your former spouse acquired the interest when you and your former spouse were registered as joint owners of the Land freehold, in MMM 20XX, and the Crown ceased being the owner of the Land. For the purpose of paragraphs 152-105(b) of the ITAA 1997, both interests were acquired (or were taken to have been acquired) in MMM 20XX. Consequently, you did not continuously own either interest for the 15-year period ending just before the sale of the Land on DDMMYYYY. As the condition in paragraph 152-105(b) is not satisfied, the specific conditions for the 15-year exemption in Subdivision 152-B are not satisfied.