ATO Interpretative Decision

ATO ID 2003/168 (Withdrawn)

Income Tax

CGT small business concessions: active assets - Australian currency
FOI status: may be released

This ATO ID is withdrawn as the ATO view on this matter is now reflected in Draft Taxation Determination 2006/D32.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is Australian currency, that is, notes and coins, an active asset under section 152-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

No. Australian currency is not an active asset under section 152-40 of the ITAA 1997.

Facts

A company carries on business and at any particular time has Australian currency on hand (that is, notes and coins).

Reasons for Decision

For a CGT asset of a business to be an active asset for the purposes of Division 152 of the ITAA 1997 it must firstly satisfy one of the 'positive tests' in subsection 152-40(1) of the ITAA 1997 and then also not be excluded by one of the exceptions in subsection 152-40(4) of the ITAA 1997.

Under subsection 152-40(1) of the ITAA 1997 a CGT asset is an active asset at a particular time if, at that time, it is owned and used (or held ready for use) by a taxpayer or certain related entities in the course of carrying on a business or is an intangible asset that is inherently connected with a business that the taxpayer carries on.

However, paragraph 152-40(4)(d) of the ITAA 1997 provides that an asset that is a financial instrument cannot be an active asset. Australian currency, ie, notes and coins, fits within the concept of a financial instrument and is therefore not an active asset under section 152-40 of the ITAA 1997.

Australian currency can not therefore be included via subparagraph 152-40(3)(b)(i) of the ITAA 1997 in the '80% test' in paragraph 152-40(3)(b) of the ITAA 1997 to determine if the shares in a company carrying on a business are active assets. Australian currency may be included in the '80% test' via subparagraph 152-40(3)(b)(ii) of the ITAA 1997 if it represents capital proceeds received during the previous 2 years from CGT events happening to active assets and which are held pending the acquisition of new active assets.

Date of decision: 13 February 2003

Year of income: Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   section 152-40
   subsection 152-40(1)
   paragraph 152-40(3)(b)
   subparagraph 152-40(3)(b)(i)
   subparagraph 152-40(3)(b)(ii)
   subsection 152-40(4)
   paragraph 152-40(4)(d)

Related ATO Interpretative Decisions
ATO ID 2003/166
ATO ID 2003/167

Keywords
Capital gains tax
CGT assets
CGT exemptions
Financial instruments
Cheques
Active asset test
CGT small business relief
Basic conditions for relief

Business Line: Losses and CGT Centre of Expertise

Date of publication: 28 March 2003

ISSN: 1445-2782

history

	Date:	Version:
	13 February 2003	Original statement
You are here	16 June 2006	Archived

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