Income Tax Assessment Act 1997
CHAPTER 3
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SPECIALIST LIABILITY RULES
PART 3-3
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CAPITAL GAINS AND LOSSES: SPECIAL TOPICS
Division 152
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Small business relief
Subdivision 152-A
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Basic conditions for relief under this Division
Basic conditions for relief
SECTION 152-10 Basic conditions for relief 152-10(1)
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:
(d) the CGT asset satisfies the active asset test (see section 152-35 ).
CGT small business entity
152-10(1AA)
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.
Passively held assets - affiliates and entities connected with you
152-10(1A)
The conditions in this subsection are satisfied in relation to the *CGT asset in the income year if:
(a) your *affiliate, or an entity that is *connected with you, is a *CGT small business entity for the income year; and
(b) you do not carry on a *business in the income year (other than in partnership); and
(c) if you carry on a business in partnership - the CGT asset is not an interest in an asset of the partnership; and
(d) in any case - the CGT small business entity referred to in paragraph (a) is the entity that, at a time in the income year, carries on the business (as referred to in subparagraph 152-40(1)(a)(ii) or (iii) or paragraph 152-40(1)(b) ) in relation to the CGT asset.
Passively held assets - partnerships
152-10(1B)
The conditions in this subsection are satisfied in relation to the *CGT asset in the income year if:
(a) you are a partner in a partnership in the income year; and
(b) the partnership is a *CGT small business entity for the income year; and
(c) you do not carry on a *business in the income year (other than in partnership); and
(d) the CGT asset is not an interest in an asset of the partnership; and
(e) the business you carry on as a partner in the partnership referred to in paragraph (a) is the business that you, at a time in the income year, carry on (as referred to in subparagraph 152-40(1)(a)(i) or paragraph 152-40(1)(b) ) in relation to the CGT asset.
Additional basic conditions for shares in a company or interests in a trust
152-10(2)
The following additional basic conditions must be satisfied if the *CGT asset is a *share in a company, or an interest in a trust, (the object entity ):
(a) the CGT asset would still satisfy the active asset test (see section 152-35 ) if the assumptions in subsection (2A) were made;
(b) if you do not satisfy the maximum net asset value test (see section 152-15 ) - you are carrying on a *business just before the *CGT event;
(c) either:
(d) just before the CGT event, either:
152-10(2A)
For the purposes of paragraph (2)(a), in working out whether subsection 152-40(3) applies at a given time (the test time ) assume that:
(a) an asset of a company or trust is covered by neither:
(b) paragraph 152-40(3)(b) does not cover an asset that:
(c) subparagraph 152-40(3)(b)(i) also covers each asset that:
(d) subject to paragraph (b) of this subsection, all of the assets of the object entity at the test time included all of the assets of each later entity at the test time; and
(e) for the purposes of paragraph 152-40(3)(b) , the *market value at the test time of an asset held by a later entity were the product of:
152-10(2B)
For the purposes of paragraph (2A)(c), this subsection covers a later entity if:
(a) at the test time:
(b) either:
Additional basic condition for CGT events involving certain rights or interests in relation to the income or capital of a partnership
152-10(2C)
If the *CGT event involves the creation, transfer, variation or cessation of a right or interest that would entitle an entity to:
(a) an amount of the income or capital of a partnership; or
(b) an amount calculated by reference to a partner ' s entitlement to an amount of income or capital of a partnership;
(c) immediately after the CGT event happens; or
(d) if the CGT event involved the cessation of the right or interest - immediately before the CGT event happens.
Extra conditions for some concessions
152-10(3)
In addition to the basic conditions in this section, some of the concessions in this Division have extra conditions that must be satisfied for the concession to be available. These extra conditions are set out in the relevant Subdivisions.
Special rules for certain CGT events
152-10(4)
Subdivisions 152-B and 152-C do not apply to *CGT events J2, J5 and J6. In addition, Subdivision 152-E does not apply to CGT events J5 and J6.
View history note
Hide history noteSECTION 152-10 Basic conditions for relief 152-10(1)
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;
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 ).
Note:
This condition does not apply in the case of CGT event D1: see section 152-12 .
CGT small business entity
152-10(1AA)
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.
Note:
For the purposes of subsection (1A) or (1B), in determining whether an entity would be a small business entity, see also sections 152-48 and 152-78 .
Passively held assets - affiliates and entities connected with you
152-10(1A)
The conditions in this subsection are satisfied in relation to the *CGT asset in the income year if:
(a) your *affiliate, or an entity that is *connected with you, is a *CGT small business entity for the income year; and
(b) you do not carry on a *business in the income year (other than in partnership); and
(c) if you carry on a business in partnership - the CGT asset is not an interest in an asset of the partnership; and
(d) in any case - the CGT small business entity referred to in paragraph (a) is the entity that, at a time in the income year, carries on the business (as referred to in subparagraph 152-40(1)(a)(ii) or (iii) or paragraph 152-40(1)(b) ) in relation to the CGT asset.
Note 1:
The meaning of connected with is affected by section 152-78 .
Note 3:
For businesses that are winding up, see section 152-49 and subsection 328-110(5) .
Passively held assets - partnerships
152-10(1B)
The conditions in this subsection are satisfied in relation to the *CGT asset in the income year if:
(a) you are a partner in a partnership in the income year; and
(b) the partnership is a *CGT small business entity for the income year; and
(c) you do not carry on a *business in the income year (other than in partnership); and
(d) the CGT asset is not an interest in an asset of the partnership; and
(e) the business you carry on as a partner in the partnership referred to in paragraph (a) is the business that you, at a time in the income year, carry on (as referred to in subparagraph 152-40(1)(a)(i) or paragraph 152-40(1)(b) ) in relation to the CGT asset.
Note:
For businesses that are winding up, see section 152-49 and subsection 328-110(5) .
Additional basic conditions for shares in a company or interests in a trust
152-10(2)
The following additional basic conditions must be satisfied if the *CGT asset is a *share in a company, or an interest in a trust, (the object entity ):
(a) the CGT asset would still satisfy the active asset test (see section 152-35 ) if the assumptions in subsection (2A) were made;
(b) if you do not satisfy the maximum net asset value test (see section 152-15 ) - you are carrying on a *business just before the *CGT event;
(c) either:
(i) the object entity would be a *CGT small business entity for the income year; or
if the following assumptions were made:
(ii) the object entity would satisfy the maximum net asset value test (see section 152-15 );
(iii) the only CGT assets or *annual turnovers considered were those of the object entity, each affiliate of the object entity, and each entity controlled by the object entity in a way described in section 328-125 ;
(iv) each reference in section 328-125 to 40% were a reference to 20%;
(v) no determination under subsection 328-125(6) were in force;
(d) just before the CGT event, either:
(i) you are a *CGT concession stakeholder in the object entity; or
(ii) CGT concession stakeholders in the object entity together have a *small business participation percentage in you of at least 90%.
152-10(2A)
For the purposes of paragraph (2)(a), in working out whether subsection 152-40(3) applies at a given time (the test time ) assume that:
(a) an asset of a company or trust is covered by neither:
(i) subparagraph 152-40(3)(b)(ii) (about financial instruments); nor
if the company or trust acquired that asset for a purpose that included assisting an entity to otherwise satisfy paragraph (2)(a) of this section; and
(ii) subparagraph 152-40(3)(b)(iii) (about cash);
(b) paragraph 152-40(3)(b) does not cover an asset that:
(i) is a share in a company, or an interest in a trust, (the later entity ); and
(ii) is held at the test time by the object entity directly or indirectly (through one or more interposed entities); and
(c) subparagraph 152-40(3)(b)(i) also covers each asset that:
(i) is held at the test time by a later entity covered by subsection (2B); and
(ii) is, for that later entity, an asset of a kind referred to in subparagraph 152-40(3)(b)(i) , (ii) or (iii), as modified by paragraphs (a) and (b) of this subsection; and
(d) subject to paragraph (b) of this subsection, all of the assets of the object entity at the test time included all of the assets of each later entity at the test time; and
(e) for the purposes of paragraph 152-40(3)(b) , the *market value at the test time of an asset held by a later entity were the product of:
(i) the asset ' s market value, apart from this paragraph, at the test time; and
(ii) the object entity ' s *small business participation percentage in the later entity at the test time.
152-10(2B)
For the purposes of paragraph (2A)(c), this subsection covers a later entity if:
(a) at the test time:
(i) your *small business participation percentage in the later entity is at least 20%; or
(ii) you are a *CGT concession stakeholder of the later entity; and
(b) either:
(i) the later entity would be a *CGT small business entity for the income year that includes the test time; or
if the following assumptions were made:
(ii) the later entity would satisfy the maximum net asset value test (see section 152-15 ) for a notional CGT event taken to have happened at the test time;
(iii) the only *CGT assets or *annual turnovers considered were those of the later entity and of the entities referred to in subparagraph (2)(c)(iii);
(iv) each reference in section 328-125 to 40% were a reference to 20%;
(v) no determination under subsection 328-125(6) were in force.
Additional basic condition for CGT events involving certain rights or interests in relation to the income or capital of a partnership
152-10(2C)
If the *CGT event involves the creation, transfer, variation or cessation of a right or interest that would entitle an entity to:
(a) an amount of the income or capital of a partnership; or
(b) an amount calculated by reference to a partner ' s entitlement to an amount of income or capital of a partnership;
it is an additional basic condition that the right or interest is a *membership interest of the entity in the partnership:
(c) immediately after the CGT event happens; or
(d) if the CGT event involved the cessation of the right or interest - immediately before the CGT event happens.
Extra conditions for some concessions
152-10(3)
In addition to the basic conditions in this section, some of the concessions in this Division have extra conditions that must be satisfied for the concession to be available. These extra conditions are set out in the relevant Subdivisions.
Special rules for certain CGT events
152-10(4)
Subdivisions 152-B and 152-C do not apply to *CGT events J2, J5 and J6. In addition, Subdivision 152-E does not apply to CGT events J5 and J6.
Note 1:
Those CGT events are about previous applications of the roll-over in Subdivision 152-E .
Note 2:
This Subdivision does not apply to CGT events J5 and J6 in relation to the retirement exemption (see subsection 152-305(4) ).
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