1012629612557 | Legal database

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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of private advice

Authorisation Number: 1012629612557

Ruling

Subject: Active asset

Question 1

Does the farm land satisfy the active asset test under section 152-35 of the Income Tax Assessment Act 1997?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 2014

Year ending 30 June 2015

The scheme commences on:

1 July 2013

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You and your spouse purchased farm land in 199X.

There is no residence on the land.

You ran the farm in partnership until 30 June 200X.

The land has been vacant since the partnership stopped their farming activity.

The land is currently listed with a real estate agent for sale.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 152-35.

Reasons for decision

The active asset test is contained in section 152-35 of the Income Tax Assessment Act 1997 (ITAA 1997). The active asset test is satisfied if:

• you have owned the asset for 15 years or less and the asset was an active asset of yours for a total of at least half of the test period detailed below, or

• you have owned the asset for more than 15 years and the asset was an active asset of yours for a total of at least 7.5 years during the test period.

The test period is from when the asset is acquired until the CGT event. If the business ceases within the 12 months before the CGT event (or such longer time as the Commissioner allows) the relevant period is from acquisition until the business ceases.

In this case, the business ceased more than 12 months before the CGT event will occur. Accordingly, the relevant period is from the acquisition date to the CGT event. As you have owned the property for more than 15 years, the property will need to have been active for at least 7.5 years during this period.

A CGT asset is an active asset if it is owned by you and is used or held ready for use in a business carried on (whether alone or in partnership) by you, your affiliate, your spouse or child, or an entity connected with you.

You ran a livestock farm in partnership with your spouse. It follows that the land was an active asset as it was used in a business carried on by you and your spouse from 199X until June 200X, or just over 8 years. You have owned the land for over 20 years.

The land has been an active asset for more than 7.5 years of the period that you owned it and will pass the active asset test under section 152-35 of the ITAA 1997.

Further issues for you to consider

This ruling has not considered your eligibility for the small business concessions. You should ensure that you satisfy the basic conditions and the other conditions relevant for each concession. More information is available in the publication Advanced guide to capital gains tax concessions for small business 2012-13 (NAT 3359), which is available on our website www.ato.gov.au.

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