Edited version of private advice

Authorisation Number: 1052135346893

Date of advice: 30 June 2023

Ruling

Subject: CGT - small business concessions

Question 1

Are you carrying on a primary production business?

Answer

Yes. The nature, extent, scale, and profit-making intention of the activities undertaken at the farm amount to a business of primary production being conducted.

Question 2

Are you a CGT small business entity in the 20XX income year, in accordance with subsection 152-10(1AA) and section 328-110 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. You carried on a business of farming in the 20XX income year and your aggregated turnover was less than $Xm. You are a CGT small business entity.

Question 3

Are you eligible under section 152-10 of the ITAA 1997, to consider the CGT Small Business Concessions in relation to the disposal of the medical premises?

Answer

Yes. You are a CGT small business entity carrying on a business of farming. Your medical premises is an active asset. Though the farming activity is a separate business from your previous medical business operated at the medical premises, you remain eligible to consider the Small Business CGT concessions in relation to the disposal of the medical premises.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 January 20XX

Relevant facts and circumstances

You purchased a property a medical premises and operated your medical business from this premises.

You purchased primary production land, including stock (the farm) and commenced farming. The farm is zoned as farmland by the local council and registered as a farm.

In 20XX you ceased operating your medical business at the medical premises. You rented the medical premises to an unrelated party.

You sold the medical premises in 20XX.

Your aggregated turnover for the 20XX income year was less than $2m.

The medical premises satisfies the active asset test.

The farming activity includes the following regular activities:

•         Stock are rotated on the paddocks 2-3 times per week, usually daily during winter months.

•         During winter months, silage needs to be put out for the stock 2-3 times per week.

•         Water troughs and the water tank are checked when the stock are rotated to another paddock.

•         Fences and water troughs are turned on and off and checked when the stock are moved.

•         Grass slashing and bailing (silage) performed by a contractor.

•         Repairs across the farm as required.

•         Maintenance of equipment used on the farm.

•         Twice yearly yarding of stock, including injections, weighing and castrating.

•         Upgrading stock yards.

You carry approximately XXX head of stock on the farm each year. Any more head would damage the pastures.

The farm is registered with various agricultural entities.

Stock are sold regularly.

You use a sophisticated record keeping system for receipts and invoices. You keep records of stock coming in and out through various yards.

It is your intention to make the farm more profitable to keep the farm running. You are exploring diversifying product of the land.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 subsection 152-10(1AA)

Income Tax Assessment Act 1997 section 328-110

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