# Reviewer verdict — bounty-09-cgt-active-asset-test
> **Reviewer:** Devashish Magoon, CPA
> **Consent posture:** named (upgraded from anonymous on 2026-08-20 per fresh explicit consent, Andrew direct-voice)
> **Consent date:** 2026-08-20
> **Reward paid (AUD):** $750
> **Verdict outcome (from reviewer's §6):** FIX
> **Verdict date:** 2026-07-19
> **PII sweep:** applied (see build script for pattern set); receipts logged in this PR body.
---
\---
brief\_id: bounty-09-cgt-active-asset-test
bounty\_title: "CGT small business active-asset test"
statutory\_anchors: "s 152-35, s 152-40 ITAA 1997; TR 2019/1"
reviewer:
name: "Devashish Magoon"
credential\_class: "CPA" # CA / CTA / CPA / FIPA / MIPA / TPB
registration\_status: "Active" # active / lapsed / retired
jurisdiction: "Australia"
attribution\_posture: "named" # named | initialled | anonymous (upgraded from anonymous 2026-08-20 per fresh explicit consent)
consent\_date: "2026-08-20"
reviewed\_calculator\_version: "Spec-first bounty\*\* — no existing calculator" # copy from brief
submission\_date: "2026-07-19" # YYYY-MM-DD
top\_level\_verdict: "FIX" # ACCEPT / REJECT / FIX
verdict\_hash: "" # (we compute this on receipt)
---
# Reviewer Verdict — CGT small business active-asset test
**Bounty:** bounty-09-cgt-active-asset-test
## 1\. Top-level verdict
*Choose one: **ACCEPT** / REJECT / FIX.*
* **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
## 2\. Per-question verdicts
```yaml
per\_question\_verdicts:
- question\_number: 1
verdict: "FIX"
citation\_authority: "s 152-40(1)(a); s 152-40(1)(b); s 152-40(3)"
reasoning:
s 152-40(1) itself contains two paragraphs, not three limbs: (a) the
tangible-asset limb (used, or held ready for use, in a business carried
on by the taxpayer, an affiliate, or a connected entity) and (b) the
intangible-asset limb (goodwill etc. inherently connected with such a
business). The commonly-used "three limbs" framing folds in the
separate share/interest deeming rule at s 152-40(3) (the 80% active-asset
test for shares/trust interests). This is a defensible shorthand in
practice but should be labelled as combining s 152-40(1) with s 152-40(3),
not presented as three sub-paragraphs of s 152-40(1) alone. |
edge\_case\_notes: |
If the calculator ever needs to handle shares in a holding company or
trust interests (rather than a direct asset), s 152-40(3)'s 80% test is
a materially different mechanism and should be a distinct code path,
not folded into the s 152-40(1) logic.
- question\_number: 2
verdict: "ACCEPT"
citation\_authority: "s 152-40(4)(e)"
reasoning: |
Correctly stated - the exclusion is not automatic on any rent being
derived. It requires that the "main use" of the asset be to derive
rent, assessed on the facts, and carries a temporary-use carve-out
(main use is to derive rent "only temporarily" does not trigger
exclusion). No divergence from the calculator's treatment.
edge\_case\_notes: |
The temporary-use carve-out is not tested anywhere in this brief's
scenario
- question\_number: 3
verdict: "REJECT"
citation\_authority: "TR 2019/1"
reasoning: |
TR 2019/1 is titled "Income tax: when does a company carry on
a business?" and its entire binding scope (paras 1, 4-8) is limited to
whether a company is a "small business entity" for s 328-110 ITAA 1997
and the now-superseded s 23 ITRA 1986 lower-corporate-tax-rate test. It
contains no proportional main-use-to-derive-rent methodology and does
not mention floor area, rental value, or time-based apportionment
proxies anywhere in the ruling.
edge\_case\_notes: |
Example 3,Paras 66-70 confirms that
letting commercial property to a third party at market rate can itself
amount to carrying on a business - relevant to the FIRST limb of the
active-asset test (s 152-40(1)(a), is the asset used in a business at
all) but not to the SECOND question this bounty concerns (how to
apportion a mixed-use asset's "main use" under s 152-40(4)(e)).
- question\_number: 4
verdict: "ACCEPT"
citation\_authority: "s 152-35(1); s 152-40(1)(a)"
reasoning: |
Correct treatment: a genuinely vacant period is neither "active" (absent
a case that the space was being held ready for use in the business)
nor "excluded under s 152-40(4)(e)" (no rent is being derived at all
during vacancy, so the rent-exclusion cannot bite). The ownership/test
period for the s 152-35 cumulative threshold keeps running regardless —
vacancy is a pure cost to the ratio (lengthens the denominator without
adding to the numerator), not a neutral non-event.
edge\_case\_notes: |
On these specific facts (10 of 14.5 years active) a 12-month vacancy
reclassification doesn't flip the outcome. In a tighter fact pattern it
could be outcome-determinative
- question\_number: 5
verdict: "FIX"
citation\_authority: "s 152-40(1)(a); s 152-40(4A); s 328-125; s 328-130"
reasoning: |
The brief's reference to "s 152-40(1A)" is incorrect — no such
subsection exists. The correct mechanism is: s 152-40(1)(a) already
treats use by a connected entity or affiliate as active use by the
owner; s 152-40(4A) then disregards rent paid by that connected
entity/affiliate for the purposes of the s 152-40(4)(e) main-use-to-
derive-rent exclusion. Connection is tested under s 328-125 (control
test) and affiliate status under s 328-130. On the hypothetical (a
wholly-owned subsidiary occupying the premises), both tests are met
comfortably, and the building would likely be active for the full
ownership period rather than only 10 of 14.5 years.
edge\_case\_notes: |
- question\_number: 6
verdict: "ACCEPT"
citation\_authority: "Div 108 (s 108-70); s 152-35(1)(b); s 152-10"
reasoning: |
The gap analysis is directionally sound. Of the four candidates listed,
the most consequential and least obvious is capital improvements
changing the asset's character — under Div 108 (s 108-70), a
sufficiently large improvement can be a separate CGT asset with its own
ownership start date, which would require running the active-asset and
half-of-ownership tests independently for the original asset and the
improvement. Trust/partnership composition changes are also a genuine
gap, both for the connected-entity analysis (Q5) and for downstream
CGT-concession-stakeholder tests. FBT-attributable use and below-market
rent to a connected entity are lower-priority gaps given s 152-40(4A)
already neutralises the rent-quantum question for connected-entity
arrangements.
edge\_case\_notes: |
Additional gaps beyond the four candidates worth banking: (1) the
s 152-35(1)(b) "ceasing to carry on a business" limb, adjacent to but
distinct from the declining-owner-occupation fact pattern tested here;
(2) the s 152-10 basic conditions (net asset value / turnover /
significant individual tests) as a hard prerequisite gate the
calculator will eventually need, sitting outside the active-asset test
itself; (3) consistency-of-proxy handling where the appropriate
main-use proxy (floor area vs rental value) might need to change
between periods within a single asset's history.
```
\---
## 3\. Citation audit
*List every statutory section, ATO ruling, or case-law citation the calculator/brief relies on. Mark each: ✓ correct citation / ✗ wrong citation / ⚠ citation exists but is misapplied.*
|#|Authority as cited|Your assessment|Notes|
|-|-|-|-|
|1 |s 152-40(1A)|Wrong Citation|No such subsection exists. Correct authorities for the connected-entity scenario are s 152-40(1)(a) (base active-use limb) and s 152-40(4A) (disregard of connected-entity rent for the main-use exclusion).|
|2|TR 2019/1, cited for the proportional main-use-to-derive-rent methodology (floor area/time/value proxies)|Wrong citation|TR 2019/1 is titled "Income tax: when does a company carry on a business?" and is scoped solely to the s 328-110 small-business-entity / former s 23 ITRA 1986 test. It contains no apportionment methodology and no floor-area/time/value proxy discussion. Its only reference to s 152-40 is a passing footnote to the general concept of "business" in the note to s 152-40(4), not to the main-use exclusion's apportionment test.|
|3|s 152-35(1); s 152-40(1)(a); s 152-40(3); s 152-40(4)(e)|Correct Citation|Core provisions correctly identified and applied to the scenario's facts|
|4|TR 2019/1, Example 3 (paras 66-70)|Citation exists but different application|Genuinely supports that letting commercial property to a third party can constitute carrying on a business - relevant to s 152-40(1)(a) (the "used in a business" limb), not to the s 152-40(4)(e) main-use exclusion the brief actually asks about.|
## 4\. Edge cases surfaced
*Anything the brief did not cover that you think should be tested by a future revision.*
1. Vacancy periods — confirmed as a "pure cost" to the half-of-ownership ratio (denominator runs, numerator doesn't gain), but the brief's facts don't create a case where this is outcome-determinative; a tighter fact pattern should be added to the test suite.
2. Temporary-use carve-out (s 152-40(4)(e)) untested — a short-term lease pending redevelopment or resale would exercise the "only temporarily" exception, which this brief's scenario never triggers.
3. Div 108 separate-asset improvements — a large capital improvement mid-ownership could require splitting the active-asset and half-of-ownership calculations across two assets with different start dates. Not addressed anywhere in this bounty.
4. Mid-ownership changes to trust/partnership/connected-entity status — affects both the Q5 connected-entity analysis and downstream CGT-concession-stakeholder requirements; not addressed.
\---
## 5\. TaxGenii appendix coverage feedback
*Was the pre-loaded statutory appendix (file 05) adequate? What was missing?*
*TR 2019/1 was incorrect: it's the wrong ruling entirely — it addresses s 328-110 small-business-entity status, not the main-use-to-derive-rent apportionment test this bounty needed. Recommend the KB team treat this as a correctness issue, not a coverage gap, and check whether the same wrong anchor is attached to other active-asset bounties.*
\---
## 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: Devashish Magoon
Name: Devashish Magoon
Credential: CPA
Date: 19th July 2026** (attribution upgraded from Anonymous → named on 2026-08-20 per fresh explicit consent, Andrew direct-voice; verdict content unchanged)