# Worked Example — Bounty #09

**Companion file to:** `01-brief.md`

## The scenario

**Taxpayer:** STU Investments Pty Ltd
**Asset:** Commercial building at 15 Industrial Drive, Perth WA.
**Acquired:** March 2010 for $850,000 (14.5 years ownership at time of CGT event).
**Use during ownership:**
- **Years 1–5 (2010–2015):** 100% owner-occupied for taxpayer's steel-fabrication business.
- **Years 6–10 (2015–2020):** 60% owner-occupied (business scaled down); 40% leased to unrelated third-party tenant on commercial lease.
- **Years 11–14.5 (2020–2024):** 30% owner-occupied (further scale-down); 70% leased to two unrelated tenants.
- **Disposal event:** Sale to an unrelated buyer, September 2024, for $2.6M.

## The spec's target evaluation

**Component 1 (s 152-40(1)):** The building is used, or held ready for use, in the course of carrying on a business. → YES for the owner-occupied portion, in each year.

**Component 2 (s 152-40(4)) — "main use to derive rent" exclusion:** This is the load-bearing question. The reviewer must determine, per year, whether the "main use" of the building was to derive rent.

Per TR 2019/1, the main-use test is applied on a proportional basis. If more than half the building (by floor area, or by rental value, or by another reasonable proxy) is used to derive rent, the asset's main use is to derive rent and it is excluded.

Applying per year:
- Years 1–5: 100% owner-occupied. Main use = business. **ACTIVE.**
- Years 6–10: 60% owner-occupied, 40% rented. Main use = business (owner-occupancy majority). **ACTIVE.**
- Years 11–14.5: 30% owner-occupied, 70% rented. Main use = rent. **EXCLUDED.**

**Component 3 (s 152-35) — half-of-ownership test:**

Total ownership: 14.5 years.
Half required: 7.25 years.
Active-asset years: 5 (years 1–5) + 5 (years 6–10) = **10 years**. Excluded years: 4.5 (years 11–14.5).

10 > 7.25 → **TEST PASSED**.

## The spec's predicted verdict

The building satisfies the active-asset test at disposal, notwithstanding that the most recent 4.5 years were excluded. It qualifies as an active asset for the purpose of the SB CGT concessions.

## What the reviewer is being asked

1. Is the proportional main-use test correctly applied?
2. Is "floor area" the correct proxy, or should rental value be used?
3. Is the half-of-ownership test correctly measured (10 years active vs 4.5 years excluded)?
4. What if the taxpayer had had a 12-month gap in years 8–9 where the building was vacant (not occupied, not rented)?
5. Would the interposed-entity test under s 152-40(1A) change the analysis if STU Investments had leased the building to a connected operating entity (rather than being the operator itself)?