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Edited version of your written advice
Authorisation Number: 1051327206281
Date of advice: 16 January 2018
Ruling
Subject: CGT- small business concessions- active asset
Question
Are you entitled to the active asset discount in relation to the sale of your property?
Answer
No
This ruling applies for the following period:
Year ended 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You inherited a property from your deceased spouse (the property).
You inherited the property on XX/XX/20XX.
The property was originally owned by your parent-in-law which was purchased pre 1985.
When your parent-in-law passed away in 19XX, the property was transferred to your spouse. The property was then transferred to you upon the death of your spouse in 20XX.
The property was always used to run a business, which was owned by your parent-in-law and then your deceased spouse. The business was then transferred to you upon the death of your spouse.
The business was sold on XX/XX/XXXX.
The property was then held as a passive investment property and was leased to the new business owners. The new business owners are not affiliates or a connected entity to you.
You were approached by developers to sell the property, and also X adjacent properties which you own.
These properties were sold to the developers under one property title for $XX million.
The properties were sold and settled on XX/XX/XXXX.
The properties were a combination of residential and commercial investment properties.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-10
Income Tax Assessment Act 1997 section 152-15
Income Tax Assessment Act 1997 paragraph 152-10(1)(c)
Reasons for decision
Summary
You do not meet one of the basic conditions for the small business CGT concessions at paragraph 152-10(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997). It follows that you are unable to access any of the small business CGT concessions in relation to the disposal of this property.
Detailed reasoning
Section 152-10 of the ITAA 1997 contains the basic conditions you must satisfy to be eligible for the active asset discount and other small business CGT concessions. These conditions are:
(a) a CGT event happens in relation to a CGT asset in an income year.
(b) the event would have resulted in the gain
(c) at least one of the following applies:
(i) you are a small business entity for the income year
(ii) you satisfy the maximum net asset value test in section 152-15 of the ITAA 1997
(iii) you are a partner in a partnership that is a small business entity for the income year and the CGT asset is an interest in an asset of the partnership or
(iv) the conditions in subsection 152-10(1A) or (1B) of the ITAA 1997 are satisfied in relation to the CGT asset in the income year (to do with passively assets used by your affiliate, connected entity or partnership).
(d) the CGT asset satisfies the active asset test in section 152-35 of the ITAA 1997.
To be eligible to apply the active asset discount you must satisfy all four of the basic conditions above. You must also meet any of the additional conditions specific to each of the concessions.
In your case, you satisfy conditions (a), (b) and (d), however none of the conditions under paragraph 152-10(1)(c) of the ITAA 1997 are satisfied; you are not a small business entity for the income year, your net asset values are greater than $6 million, you are not a partner in a partnership that is a small business entity with the CGT asset being an interest in an asset of the partnership and the CGT asset is not used in a business carried on by a small business entity that is your affiliate, your connected entity or a partnership of which you are a partner.
As you do not satisfy any of the conditions under this paragraph, you are unable to access the active asset discount. You are also unable to access the remaining small business CGT concessions in relation to the disposal of this property.
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