# Reviewer verdict — bounty-08-cgt-sb-15-year-exemption

> **Reviewer:** Dev Magoon, CPA
> **Consent posture:** initialled
> **Reward paid (AUD):** $900
> **Verdict outcome (from reviewer's frontmatter):** FIX
> **Verdict date:** 2026-09-14
> **PII sweep:** applied (no email/phone/registration PII in body); receipts logged in this PR body.

---

\---

brief\_id: bounty-08-cgt-sb-15-year-exemption
bounty\_title: "CGT small business 15-year exemption"
statutory\_anchors: "Subdiv 152-B ITAA 1997; s 152-105, s 152-110"
reviewer:
name: "Dev Magoon"
credential\_class: "CPA"        # CA / CTA / CPA / FIPA / MIPA / TPB
registration\_status: "active"     # active / lapsed / retired
jurisdiction: "Australia"
attribution\_posture: "intialled"  # named | initialled | anonymous
reviewed\_calculator\_version: "n/a — spec-first bounty (no existing calculator)"
submission\_date: "2026-09-14"              # YYYY-MM-DD
top\_level\_verdict: "FIX"         # ACCEPT / REJECT / FIX
verdict\_hash: ""                 # (we compute this on receipt)
---

# Reviewer Verdict — CGT small business 15-year exemption

**Bounty:** bounty-08-cgt-sb-15-year-exemption

## 1\. Top-level verdict

*Choose one: **ACCEPT** / <b>REJECT</b> / <b>FIX</b>.*

* **ACCEPT** — the calculator's statute-to-predicate translation is correct on the facts of the brief. Minor stylistic comments allowed.
* **REJECT** — the calculator's translation is materially wrong. State the section/case-law authority you rely on.
* **FIX** — the translation is mostly correct but has a specific error that can be fixed with a targeted change. Describe the fix.

**Your top-level verdict: FIX**

Three things need fixing.

**1. Add s 152-10(2).** The asset is shares, and the brief never mentions this subsection. Since 8 February 2018 it adds three basic conditions for share sales: a modified active asset test on the s 152-10(2A)/(2B) assumptions; the object entity must be a CGT SBE or satisfy MNAV (each 40% in s 328-125 read as 20%); and the stakeholder / 90% test. It is the biggest gap, and it fails quietly.

**2. s 152-110(1)(c) is cumulative, not continuous.** The brief says a significant individual is needed "at all times". The section says a total of at least 15 years, and expressly that the years need not be continuous or the same person.

**3. s 152-35 is 7.5 years, not "the majority of ownership".** For an asset owned over 15 years the section asks for a total of 7.5 years. The worked example also merges this with the separate 80% composition test in s 152-40(3).

The predicted verdict doesn't follow either. MNAV, the 80% test, the s 152-110(1)(c) count, s 152-110(1)(d) and all of s 152-10(2) are unresolved on the facts given, so eligibility isn't established.

Predicate list at Appendix A, per brief section 3.

\---

## 2\. Per-question verdicts

```yaml
per\_question\_verdicts:
  - question\_number: 1
    verdict: "ACCEPT"
    citation\_authority: "s 152-105; s 152-110; s 152-80"
    reasoning: |
      s 152-110 applies. s 152-105 only covers individuals and the taxpayer is
      the trustee. That the trust is discretionary doesn't change which section initially
     though it changes nearly everything after that.

      Choosing the section doesn't close out the conditions. The asset is a
      share, so s 152-10(1) isn't the whole of the basic conditions.
    edge\_case\_notes: |
      No death branch in the brief. s 152-80 carries the concessions to an LPR or
      beneficiary where the event is within two years of death.

  - question\_number: 2
    verdict: "ACCEPT"
    citation\_authority: "s 152-110(1)(b), (1)(c); s 152-115; s 104-10(3)"
    reasoning: |
      July 2008, when the trust acquired the shares — not when Bob or the company
      started trading. The far end is fixed by s 104-10(3), since A1 happens at
      contract, so the period closes just before 15 September 2024, in FY2025.

      The brief runs two clocks together and they need separating.
      s 152-110(1)(b) wants continuous ownership across the 15 years ending just
      before the event. s 152-110(1)(c) wants a significant individual for a
      total of 15 years, which can be broken up and can be different people.
    edge\_case\_notes: |
      s 152-115 only continues the period through Subdiv 124-B and 126-A
      rollovers. A Subdiv 122-A incorporation restarts it, because the shares are
      acquired on issue. The predicate needs how the asset was acquired, not just
      when.

  - question\_number: 3
    verdict: "FIX"
    citation\_authority: "s 152-55, s 152-65, s 152-70(1) item 3, s 152-75; cf s 328-125(4); ATO ID 2012/99"
    reasoning: |
      Control over the trustee is irrelevant to s 152-55, and the question
      invites the wrong answer by offering it.

      s 152-55 is a percentage test: SBPP of at least 20%, direct under s 152-70
      plus indirect under s 152-75. For a discretionary trust you use item 3 of
      the s 152-70(1) table, which takes the smaller of the income-distribution
      and capital-distribution percentages for that year. Control sits in
      s 328-125(4) and feeds MNAV and turnover instead.

      Two things follow. The item 3 percentage is worked out from distributions
      made during the income year and applies across that year, so Bob's status
      "just before" 15 September 2024 is set by resolutions the trustee makes up
      to nine months afterwards. And on the smaller-of mechanic, ATO ID 2012/99
      Note 1: distribute a gain as capital with no matching income distribution
      and the beneficiary comes out at nil. That's the risk.

      "Salary and franked distributions for 16 years" doesn't establish any of
      it. Salary isn't a trust distribution, franked distributions only touch the
      income limb, and the brief says nothing about capital distributions.
    edge\_case\_notes: |
      No-distribution years aren't uniform. Where the trust had no net income or
      a tax loss AND made no distribution, you look back to the last year a
      distribution was made. Where it had net income, no loss, and the trustee
      chose not to distribute, the percentage is nil and the year is lost off the
      s 152-110(1)(c) count. The spec needs both.

  - question\_number: 4
    verdict: "FIX"
    citation\_authority: "s 152-40(3), (3A), (4); s 152-35(1)(b), (2); s 152-10(2)(a), (2A), (2B); TD 2006/65; Eichmann v FCT \[2020] FCAFC 155"
    reasoning: |
      Before answering, the parenthetical in the question is itself wrong on two
      counts.

      It states the test as market value of active assets being at least 80% of
      total market value. That is only the first of three limbs in the numerator.
      s 152-40(3)(b) also counts financial instruments of the company inherently
      connected with a business it carries on, and cash inherently connected with
      such a business. Drop those and the numerator is understated, which can
      push the answer either way depending on the company's asset mix.

      It also directs the reviewer to "Wilson Trading's balance sheet". The test
      is market value on both sides of the ratio, not book value. Goodwill is the
      clearest illustration — an active asset at market value, appearing nowhere
      in the accounts, and on a mature trading business frequently the item that
      carries the ratio over 80%. Anyone answering from the balance sheet is
      answering a different question.

      On the question itself, there are three thresholds rather than one.

      Composition, s 152-40(3). The share is active at a time if the company is
      then an Australian resident and the three limbs above come to 80% or more
      of the market value of everything it owns. Cash and financial instruments
      aren't active assets themselves but count in the numerator where inherently
      connected; surplus cash, investments, a rental property or a shareholder
      loan is denominator only. Sixteen years of retained profits is a realistic
      way to fail this. See also TD 2006/65 (the test applies successively
      through a chain), s 152-40(3A), s 152-40(4)(e), and Eichmann, where the
      Full Court took a broader view of "in the course of carrying on a business"
      than the primary judge had.

      Duration, s 152-35. Owned over 15 years, so a total of at least 7.5 years
      across a period from acquisition to the earlier of the event and cessation
      of business, and the periods needn't be contiguous. A cumulative count:
      test the 80% composition at points across the 16.5 years and add the
      qualifying days.

      Then s 152-10(2)(a), which the brief omits altogether. The asset must still
      satisfy the test on the s 152-10(2A) assumptions, which strip out cash and
      financial instruments acquired to help pass it and disregard later-entity
      shares unless s 152-10(2B) is met. Harder than s 152-40(3) alone, and it
      runs across the ownership period.

      There's no balance sheet for Wilson Trading in the bundle, so I can't
      resolve this one either way.
    edge\_case\_notes: |
      The 2018 amendments restructured s 152-10(2), and material still in
      circulation (ATO ID 2012/99, TD 2006/65) cites "152-10(2)(b)" for the 90%
      test, which has moved. Take paragraph references from a current
      compilation.

  - question\_number: 5
    verdict: "FIX"
    citation\_authority: "s 152-110(1)(d)(i); ATO 'Small business 15-year exemption' guide"
    reasoning: |
      Intention alone won't do it. The event has to happen in connection with the
      individual's retirement.
      The phrase isn't defined in the Act, and I could not locate a public
      ruling, determination or judicial consideration of it. The Commissioner's
      guidance appears to be the only source. It looks for at least a significant
      reduction in hours, or a significant change in the nature of present
      activities, and doesn't require permanent retirement. Its examples bracket
      the range: sell up and then work a few hours a week for the buyer and
      you've retired; go from 60 hours to 45 and you haven't.

      Bob stepping down as MD and staying on at $1,000 a year as a non-executive
      advisor is both a change in the nature of the role and a large cut in
      hours, so I'd accept it — unless the role is cover for continuing to run
      the place, or the same work moves to another entity.

      Two framing problems. "Bob is 68, retiring — YES" treats age plus assertion
      as the answer, when the nexus is a separate limb with no evidence behind
      it. And it's Bob's retirement, so he must be a significant individual
      first: Q5 can't be answered ahead of Q3.

      Not determinable from documents. I'd express it as a judgement call against
      a stated evidence set: hours before and after, change in the role,
      remuneration, directorships kept, and whether the sale forms part of a
      documented retirement plan.
    edge\_case\_notes: |
      s 152-110(1)(d)(ii), permanent incapacity, has no age threshold. The brief
      mentions it once and never returns to it.

  - question\_number: 6
    verdict: "FIX"
    citation\_authority: "s 152-125(1), (2); s 152-60; s 152-70(1); s 104-70; s 152-110(2); Subdiv 118-I; s 292-100"
    reasoning: |
      On whether the distribution is a further CGT event, my view is no, though I
      would put that as the orthodox position rather than a settled one. The
      candidate is E4 under
      s 104-70, aimed at a unit or interest with a cost base to adjust, and a
      discretionary object holds a mere expectancy. I haven't found authority
      squarely on point. Note s 152-110(2) as well: income the trust derives from
      the event is neither assessable nor exempt, so it never reaches s 95 net
      income.

      s 152-125 is the operative provision, and the brief misses four points:

      - Exempt amount is the gain disregarded, so $4.15M, not the $4.2M of
        proceeds; the $50,000 cost-base return is trust capital.
      - The payee must have been a CGT concession stakeholder just before the
        event, so Maree may come in on the spouse limb and change the caps.
      - Time limit is the later of two years after the event and six months after
        the last possible earnout benefit. No earnout here, so 15 September 2026,
        from contract date, with no discretion to extend.
      - s 152-125(2) caps the disregarded amount by the stakeholder's
        participation percentage, so paying Bob the whole $4.2M isn't
        automatically protected. Confirm which limb applies to a discretionary
        trust — s 152-125(2)(a) refers to item 2 of the s 152-70(1) table, which
        is fixed interests.

      The point that matters most, and why this can't be separated from Q3. Bob
      needs 20% under item 3 for FY2025, being the smaller of his income and
      capital percentages. To get him the money the trustee wants to push the
      disregarded gain out as capital, and it isn't s 95 income. Unmatched by a
      sufficient income distribution, the income limb sets his percentage and it
      can be nil. One trustee resolution decides both whether s 152-110(1)(d) is
      satisfied and whether s 152-125 protects the payment, so the two can't be
      tested independently.
    edge\_case\_notes: |
      Downstream and out of scope, but flagging it: the 15-year limb of s 292-100
      allows the whole capital proceeds, not just the gain, to be excluded from
      the non-concessional cap up to the lifetime CGT cap ($1.78M for 2024-25).
      The election must be in the approved form and given to the fund on or
      before the contribution.

  - question\_number: 7
    verdict: "ACCEPT"
    citation\_authority: "see section 4"
    reasoning: |
      All four listed candidates are worth testing and I've taken each at section
      4. The find I'd put forward is item 1 there, on s 152-10(2).
    edge\_case\_notes: |
      See section 4.
```

\---

## 3\. Citation audit

|#|Authority as cited|Your assessment|Notes|
|-|-|-|-|
|1|Subdiv 152-B; s 152-105; s 152-110|✓ / ⚠|Routing right; (1)(c) misstated as "at all times".|
|2|s 152-10|⚠|(2), (2A), (2B) omitted though the asset is a share; (4) omitted.|
|3|"SBE < $2M" / "MNAV $6M"|✓ / ⚠|Thresholds right; no cite to s 152-15 or s 152-20; "likely PASS" unsupported.|
|4|s 152-35 to s 152-40|⚠|"Majority of ownership" should be a total of 7.5 years.|
|5|s 152-40(3)|⚠|Numerator stated as one limb of three; balance sheet cited where market value applies.|
|6|s 152-55|⚠|Q3 offers control over the trustee, which is s 328-125(4).|
|7|s 152-125|✓|Identified; time limit, stakeholder definition and cap not surfaced.|
|8|s 152-60; s 152-65/70/75|✗|Absent. Item 3 of the s 152-70(1) table is the only route to the test for a discretionary trust.|
|9|s 328-125 / s 328-130|✗|Absent. Needed for MNAV, turnover and s 152-10(2).|
|10|s 104-10(3); s 152-115; s 152-80|✗|Absent. Period ends, rollover continuity, death branch.|
|11|s 152-215 / 152-330 / 152-430|✗|Absent. Brief section 5 treats the concessions as independent.|
|12|Subdiv 118-I|✗|Absent. Moves the s 152-125 deadline.|
|13|TD 2006/65; *Eichmann v FCT* \[2020] FCAFC 155|✗|Absent. Chain testing; carrying on a business.|

\---

## 4\. Edge cases surfaced

Item 1 is my answer to Q7. Items 2 to 8 cover the brief's listed candidates and the smaller points.

1. **s 152-10(2) is absent from the spec entirely.** Not on the candidate list, not tested by any of Q1 to Q6, and capable of changing the answer on its own. Since 8 February 2018 the basic conditions for a share sale also require a modified active asset test on the s 152-10(2A)/(2B) assumptions, the object entity to be a CGT SBE or satisfy MNAV with each 40% in s 328-125 read as 20%, and the CGT concession stakeholder / 90% test. Two consequences worth separating. A calculator built to the brief returns eligible on share sales that fail these conditions, and the failure is silent because nothing in the condition set is looking. And the s 152-10(2A) test is materially harder than s 152-40(3) alone and applies across the ownership period, so it isn't one extra check at the end. Needs a test case per limb.
2. **MNAV probably fails.** Wilson Trading is wholly owned, so its value counts, and the $4.2M price is evidence of it. Add Bob's and Maree's assets and $6M is close. Turnover under $2M may fail too. Worth a case where both fail.
3. **Trustee change vs resettlement.** Changing trustee doesn't change the owner. A resettlement does (TD 2012/21, with *Clark* \[2011] FCAFC 5 and *Commercial Nominees* \[2001] HCA 33). Test whether the trust estate continued.
4. **Changing distribution patterns.** These move item 3 year by year. 100% to Bob for ten years then split five ways for six can leave fewer than 15 qualifying years with no structural change at all.
5. **Rollovers.** Only Subdiv 124-B and 126-A continue the period. Subdiv 122-A and scrip-for-scrip under Subdiv 124-M restart it.
6. **Partial disposal.** Ownership and the active asset test hold on the shares sold. The retirement nexus is what fails — keeping 40% is hard to square with a significant reduction in hours.
7. **Ordering.** Subdiv 152-B sits outside the s 102-5 method statement: gain goes entirely, no capital losses applied, Div 115 never reached. No election, and s 152-215, s 152-330 and s 152-430 shut out the other three concessions where it applies. Test it first, treat it as dispositive.
8. **Three small ones.** Earnouts (Subdiv 118-I shifts proceeds, income year and the s 152-125 deadline); a June contract with July settlement; and residency under s 152-40(3)(a).

\---

## 5\. TaxGenii appendix coverage feedback

The appendix supplies four database links and the three anchors. Two of the links — ITAA 1936 and FBTAA 1986 — have no bearing on a Subdiv 152-B bounty, so the block reads as standing boilerplate rather than anything pre-cached for this question. The sections, rulings and case law are all placeholders inviting the reviewer to go and find them, which sits against the undertaking at the top that the load-bearing citations are already here. I sourced everything myself.

The anchors are too narrow as well. What decides this one is s 152-10(2), s 152-40(3), s 152-55 to s 152-75 and s 152-125, none of which are listed.

\---

## Appendix - For reference and ease

Predicates in plain English, in test-precedence order, with authority.

```
1  a CGT event happens to a CGT asset      \[s 108-5; s 152-10(1)(a); s 104-10(3)]
2  the event is not J2, J5 or J6           \[s 152-10(4)]
3  it would give a capital gain apart from Div 152   \[s 152-10(1)(b)]
4  owner is an individual, or a company or trust     \[s 152-105 / s 152-110]
5  asset is, or is not, a share or trust interest — gates 14-17
```

**Threshold entity tests, any one limb (s 152-10(1)(c))**

```
6  taxpayer is a CGT small business entity  \[s 152-10(1AA) — $2M turnover]
7  or satisfies MNAV, $6M just before the event      \[s 152-15; s 152-20]
     aggregating connected entities \[s 328-125] and affiliates \[s 328-130]
8  or a partner / passively-held limb       \[s 152-10(1)(c)(iii); (1A), (1B); s 152-47]
```

**Active asset test (s 152-10(1)(d))**

```
9  the asset is active at a given time      \[s 152-40(1)]
10 and not caught by the rent / interest / royalty exclusions  \[s 152-40(4)]
11 for shares, the 80% composition test at market value        \[s 152-40(3)]
     numerator = active assets + financial instruments + cash, inherently connected
     applied successively through a chain \[TD 2006/65]; later time \[s 152-40(3A)];
     company Australian-resident \[s 152-40(3)(a)]
12 test period: acquisition to the earlier of the event and cessation  \[s 152-35(2)]
13 owned <=15y, active half the period; owned >15y, active a total 7.5y \[s 152-35(1)]
```

**Additional conditions for a share or interest (events from 8 Feb 2018)**

```
14 still satisfies the active asset test on the (2A)/(2B) assumptions  \[s 152-10(2)(a)]
15 taxpayer carrying on a business just before the event, if MNAV not met \[s 152-10(2)(b)]
16 object entity is a CGT SBE or satisfies MNAV, each 40% read as 20%     \[s 152-10(2)]
17 taxpayer is a CGT concession stakeholder, or stakeholders together hold
     at least 90% of the taxpayer                                        \[s 152-10(2)]
```

**Participation percentages**

```
18 SBPP = direct + indirect                \[s 152-65]
19 direct SBPP                             \[s 152-70(1)]
     company: item 1 — lowest of voting, dividend and capital rights
     fixed trust: item 2
     discretionary trust: item 3 — the SMALLER of the income and capital
       distribution percentages, applying for the whole income year
     no-distribution years: look back to the last year a distribution was
       made, but only where the trust also had no net income or a tax loss
20 indirect SBPP                           \[s 152-75]
21 significant individual: SBPP of at least 20%   \[s 152-55]
22 CGT concession stakeholder: a significant individual, or their spouse
     with SBPP above zero                  \[s 152-60]
```

**15-year exemption, company or trust**

```
23 basic conditions satisfied              \[s 152-110(1)(a)]
24 continuous ownership across the 15 years ending just before the event \[s 152-110(1)(b)]
     continued through Subdiv 124-B and 126-A rollovers only  \[s 152-115]
25 a significant individual for a TOTAL of at least 15 years during ownership;
     not necessarily continuous or the same person           \[s 152-110(1)(c)]
26 an individual who was a significant individual just before the event  \[s 152-110(1)(d)]
27 that individual was 55 or over just before the event      \[s 152-110(1)(d)(i)]
28 and the event happened in connection with their retirement — judgement
     predicate, see Q5                     \[s 152-110(1)(d)(i)]
29 or that individual was permanently incapacitated          \[s 152-110(1)(d)(ii)]
30 disregard a pre-CGT status change for 24 and 25           \[s 152-110(1A)]
```

Individual branch (s 152-105): read 25 as s 152-105(c) where the asset is a share, and apply 27-28 to the taxpayer.

**Consequences and ordering**

```
31 the capital gain is disregarded in full  \[s 152-110(1)]
32 income from the event is neither assessable nor exempt  \[s 152-110(2)]
33 capital losses aren't applied and Div 115 isn't reached
34 Subdiv 152-C, D and E are unavailable for this gain  \[s 152-215; 152-330; 152-430]
35 no election needed — Subdiv 152-B has no choice provision
```

**Downstream payment**

```
36 exempt amount is the gain disregarded, not the proceeds   \[s 152-125(1)(a)]
37 payee was a stakeholder just before the event             \[s 152-125(1)(c)]
38 paid before the later of two years after the event and six months after
     the last possible earnout benefit     \[s 152-125(1)(b)]
39 within the stakeholder's participation cap                \[s 152-125(2)]
40 traced through interposed entities where relevant
41 earnout rights looked through            \[Subdiv 118-I]
42 CGT cap election in the approved form, given on or before the contribution \[s 292-100]
```

For a discretionary trust, 19, 21 and 22 all depend on the trustee's distribution resolution for the year of the event, and that same resolution is how the payment at 36-39 is made. So 19, 25, 26, 38 and 39 are interdependent as a matter of law: a capital-only distribution of the exempt amount drives the income limb of item 3 to zero and extinguishes the significant-individual status 26 rests on (ATO ID 2012/99, Note 1).

\---

## 6\. Attestation

I have reviewed this bounty artefact bundle on the facts as presented. My verdict above reflects my professional judgement as at the submission date. I understand my verdict will be minted into the public reviewer registry with the attribution posture stated in the frontmatter.

**Signed: Dev Magoon
Name:** Dev Magoon
**Credential: CPA
Date: 14/09/2026**