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Edited version of private advice
Authorisation Number: 1052342680251
Date of advice: 12 December 2024
Ruling
Subject: CGT - small business concessions
Question 1
Do the properties satisfy the active asset test under section 152-35 and section 152-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer 1
Yes. We consider the properties owned by the trust to be an active asset. The trust owned the properties for over 15 years. One of the properties were used by a company connected with them in the course of carrying on a business for over 7.5 years. The other property was rented to a non-related third party. The main use of the properties was not to derive rent during the years which the business operated.
This ruling applies for the following period:
Year Ending 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
The trust purchased the properties as one title in XXX 20XX.
Property A had been used to operate a business by the company since XXX 20XX.
Person A and person B are directors of the company - with person A being the sole shareholder.
Both person A and person B are beneficiaries of the trust.
The time between acquisition of the properties and the start of business use was spent fitting out the premise.
Property B had been rented to non-related parties since December 2005, with a few periods on vacancy while looking for tenants, fitting out for new tenants etc.
The properties are similar in size, with property A being the slightly larger of the two.
The income derived from the business has made up around 90% of total income of the properties with rent from property B being the remaining 10%.
The properties sold in XXX 20XX.
The business is still trading but at a smaller premise.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Act 1997 section 152-40
Income Tax Assessment Act 1997 section 328-125
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