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Are the requirements of the 15-year exemption, pursuant to subdivision 152-B of the Income Tax Assessment Act 1997 (ITAA 1997) met that both individuals can disregard any capital gain arising from CGT event A1 happening in relation to the disposal of the property?

Yes. This ruling applies for the following period : Year ended 30 June 202X The scheme commenced on: 1 July 202X

The individuals purchased a property in 19xx for $X. The individuals are partners in a partnership. The partnership conducts a primary production business and had a turnover of less than $2 million in the 202X-2X financial year. The partnership's turnover for the 202X-2X financial year will be less than $2 million. The individuals do not have any affiliates. The individuals own 50% of shares in another company which has not traded since it was registered in 20XX. The individuals received an offer of $X to purchase the property. The conditions for the sale include: -       a X year settlement from the date of exchange -       $X upon signing of the contract -       $X in 18 months -       $X in 36 months -       Balance payable on the last day of the settlement -       The individuals are required to continue to maintain the property as a condition of the sale The individuals are over 55 years old. The partnership will reduce the stock on the land by X% and will cease operating the business once these cattle have been offloaded and operations are wound down. This will take 6 to 12 months. The individual will also cease full time employment once the contract is executed.

Income Tax Assessment Act 1997 Division 152-A Income Tax Assessment Act 1997 Division 152-B

All references are to the Income Tax Assessment Act 1997 unless stated otherwise. Basic conditions Division 152 provides small business relief from capital gains tax (CGT) provisions subject to a number of conditions being met. The basic conditions for relief under Division 152 are contained in section 152-10 of Subdivision 152-A. Subsection 152-10(1) reads as follows: 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)          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 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 small business entity for the income year and the CGT asset is an interest in an asset of the partnership;

(iv)         the conditions mention in subsections (1A) or (1B) are satisfied in relation to the CGT asset is an interest in an asset of the partnership (d)          the CGT asset satisfies the active asset test (see section 152-35) Section 328-110 relevantly reads: You are a small business entity for an income year (the current year) if: (a)          you carry on 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 income year and your aggregated turnover for the previous year was less than $2 million; (ii)           your aggregated turnover for the current year is likely to be less than $2 million. Broadly, a taxpayer's aggregated turnover is the sum of their annual turnover together with the annual turnover of any entity that is an affiliate or is connected to the taxpayer - see sections 328-115, 328-130 and 328-125 of the ITAA 1997. Active asset The term "active asset" is defined in subsection 995-1(1) to have the meaning given by section 152-40. Section 152-40 relevantly reads: 152-40(1) 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 (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. Section 152-35 regarding the active asset test relevantly reads: 52-35(1) A CGT asset satisfies the active asset test if: (a)          you have owned the asset for 15 years or less and the asset was an active asset of your for a total of at least half of the period specified in subsection (2); (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 7½ years during the period specified in subsection (2). 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. 15-year exemption The small business 15-year exemption takes priority over the other small business concessions and the CGT discount. If the small business 15-year exemption applies, you entirely disregard the capital gain so there is no need to apply any further concessions. Further, you do not reduce the capital gain by any capital losses before you apply the 15-year exemption concession. Section 152-105 of the ITAA 1997 provides that an individual can entirely disregard any capital gain if all of the following conditions are satisfied: (a)          you satisfy the basic conditions (b)          (b) you continuously owned the CGT asset for the 15-year period ending just before the CGT event (c)           (c) you are either: (i)            55 or over at the time of the CGT event and the event happens in connection with your retirement; or (ii)           permanently incapacitated at the time of the CGT event. Application to your circumstances

In this case, a CGT event will occur when the contract of sale is executed which will result in a capital gain. The partnership is a small business entity with a turnover of less than $2 million. The property has been owned for more than 15 years and used in the course of carrying on a business for at least 7.5 years. Therefore, the property is an active asset and the basic conditions have been satisfied. The individuals are over 55 years of age and given the reduction in hours and change in activities we accept that the property will be disposed of in connection with each individual's retirement. As all the relevant conditions have been satisfied the individuals are entitled to disregard any capital gain made on the disposal of the property.