• The active asset test

    This test requires the capital gains tax (CGT) asset to be an active asset for:

    • 7½ years, if owned for more than 15 years, or
    • half of the period of ownership if owned for 15 years or less.

    There are modified time periods for:

    • CGT assets acquired or transferred under the rollover provisions relating to assets compulsorily acquired, lost or destroyed, or those relating to marriage breakdown
    • assets sold after the business had ceased.

    An active asset may be a tangible asset (such as land) or an intangible asset (such as goodwill).

    An tangible or intangible asset is a CGT active asset if it is used or held ready for use in the course of carrying on a business by:

    • you
    • your spouse or child under 18 years
    • your affiliate, or
    • an entity connected with you.

    An intangible asset is also a CGT active asset if it is inherently connected with a business that is carried on by:

    • you
    • your spouse or child under 18 years
    • your affiliate, or
    • an entity connected with you.

    A special affiliate rule applies to treat your spouse or child under 18 years as your affiliate where your asset is used in the business carried on by your spouse or child under 18.

    A share in a company or interest in a trust can also be an active asset if it meets the 80% test.

    However, certain CGT assets can’t be active assets, even if they are used or held ready for use in the course of carrying on a business – for example, assets whose main use is to derive rent. Generally a rental property will not qualify as an active asset. In working out what the main use of your asset is, all uses of the asset (except any personal use by you or your affiliate) are considered and any use by your affiliate or entity connected with you is treated as your use.

      Last modified: 21 Jun 2016QC 19744