Taxation Determination

TD 2006/78A1 - Addendum

Income tax: capital gains: are there any circumstances in which the premises used in a business of providing accommodation for reward may satisfy the active asset test in section 152-35 of the Income Tax Assessment Act 1997 notwithstanding the exclusion in paragraph 152-40(4)(e) of the Income Tax Assessment Act 1997 for assets whose main use is to derive rent?

Addendum

This Addendum is a public ruling for the purposes of the Taxation Administration Act 1953. It amends Taxation Determination TD 2006/78 to reflect changes in the law as set out below.

For CGT events happening in the 2006-07 or later income years

Taxation Laws Amendment (2006 Measures No 7) Act 2007:

·
amended the active asset test in section 152-35 of the Income Tax Assessment Act 1997 (ITAA 1997) by removing the requirement for the asset to be an active asset just before a particular time and modifying the period during which the asset must be an active asset where it is owned for more than 15 years; and
·
amended the definition of active asset in subsection 152-40(1) of the ITAA 1997 to make clear that intangible assets inherently connected with a business carried on by a connected entity or a small business CGT affiliate can be active assets.

TD 2006/78 is amended as follows:

1. Paragraph 17

Insert after the paragraph:


Note

17A. The amendments applied to this consolidated Determination apply to CGT events happening in the 2006-07 year or later income years.

2. Paragraph 18

Omit:


active asset, both at a particular time and for half a particular period.

Substitute:


active asset:

·
for a total of at least half of the period specified in subsection 152-35(2) of the ITAA 1997 if you have owned the asset for 15 years or less; or
·
for a total of at least 7 1/2 years during the period specified in subsection 152-35(2) of the ITAA 1997 if you have owned the asset for more than 15 years.

3. Paragraph 19

(a)
In the first dot point omit 'paragraphs 152-40(1)(a) and (c)'; substitute 'paragraph 152-40(1)(a)'.
(b)
In the second dot point omit 'you carry on'; substitute 'that is carried on by you, your small business CGT affiliate, or an entity connected with you'.

4. Legislative References

(a)
Insert:

- ITAA 1997 152-35(2)
(b)
Omit:

- ITAA 1997 152-40(1)(c)

This Addendum applies to CGT events happening in the 2006-07 income year or later income years.

Commissioner of Taxation
17 December 2012

References

ATO references:
NO 1-2NIWPML

ISSN: 1038-8982