ATO Interpretative Decision

ATO ID 2005/218

Income Tax

Capital gains tax: roll-over to wholly owned company - business asset - part use
FOI status: may be released
Status of this decision: Decision Current

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 an asset which is partly used in a taxpayer's business an 'asset of a business' for the purpose of the table in section 122-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. An asset which is partly used in a taxpayer's business is an 'asset of a business' for the purpose of the table in section 122-15 of the ITAA 1997.

Facts

The taxpayer is a sole trader running a business. The taxpayer owns a commercial building part of which is used as a retail outlet for the taxpayer's business. The rest of the building is rented out by the taxpayer to two other unrelated businesses.

The taxpayer is considering transferring assets to a wholly owned company and choosing roll-over relief under Subdivision 122-A of the ITAA 1997.

Reasons for Decision

Section 122-15 of the ITAA 1997 provides that an individual can choose to obtain a roll-over in certain circumstances if one of the specified CGT events occurs. The disposal to a company of a CGT asset, or 'all the assets of a business', is (are) a CGT event(s) to which this provision applies. The term 'all the assets of a business' is not defined in Subdivision 122-A of the ITAA 1997.

The question is whether an asset used partly in a business and partly for other purposes is nevertheless an 'asset of a business' for the purpose of the roll-over in section 122-15 of the ITAA 1997.

There is no main use test within Subdivision 122-A of the ITAA 1997. An asset used partly in a business as in the circumstances of this case and partly for other purposes is therefore an asset of the business for the purpose of the roll-over in section 122-15 of the ITAA 1997.

Date of decision: 4 July 2005

Year of income: Year ended 30 June 2005

Legislative References:
Income Tax Assessment Act 1997
Subdivision 122-A
section 122-15

Keywords
Capital gains
Capital gains tax
CGT assets
CGT roll-over relief

Siebel/TDMS Reference Number: 4574351

Business Line: Public Groups and International

Date of publication: 29 July 2005

ISSN: 1445-2782

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