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Edited version of private advice

Authorisation Number: 1052161092262

Date of advice: 29 August 2023

Ruling

Subject: Small business concessions - active asset test

Question

Has Lot B2 been used "in the course of carrying on a business" by you in a manner that satisfies the requirements of subsection 152-40(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

Lot B2 has been used in the course of carrying on a business and satisfies the requirement of section 152-40 of ITAA 1997. Though used irregularly in Eichmann V FCT, the FFC stated that paragraph 152-40(1)(a) does not require the use of the relevant asset to take place within the day to day or normal course of carrying on of a business. Further information can be found by searching 'QC 52271' on ato.gov.au.

This ruling applies for the following period:

Period ended 30 June 20XX

The scheme commenced on:

1 July 19XX

Relevant facts and circumstances

You are a company who operates a function centre and guest house. The company is controlled by two directors.

You purchased a property which you subdivided in the year 19XX into Lot A and B.

You sold Lot A to the directors.

You retained Lot B and undertook substantial improvements on the property.

You operated the property in a business from the year 20XX till the present point in time.

You had a high profile in local area with numerous awards and was profitably but, of the business has suffered since the Global Financial Crisis in the year 20XX/20XX.

The directors and shareholders wish to retire and divest their assets so they can invest their funds passively, to realise this they subdivided into three separate lots at a specified date being Lot B1, B2 and B3.

You sold Lot B2 in the 2023 income year, contracts exchange and settlement taken during the ruling period.

The Lot B2 share boundaries with both lot B1 and B3. There is no fence or dividing lines. Prior to the subdivision it was physically part of the land area comprising of the business.

You had no buildings on Lot B2, all buildings on Lot B1 and Lot B3.

You utilised the land for the following:

•         Carriage of power, water and telephone infrastructure (in-ground and above)

•         Entry to the dam for guest

•         Used by guests for sporting activities for example: cricket, football and kite flying

•         Occasion used as overflow for parking.

The land had an easement for power lines to the business.

You mowed and maintained the land so that it could be used as part of the business.

You used the land in this manner for more than 20 years.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 152-40(1)

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