| Disclaimer This edited version has been archived due to the length of time since original publication.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. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012493894607
Ruling
Subject: Active asset test
Question
Does the CGT asset satisfy the active asset test?
Answer
Yes.
This ruling applies for the following period
1 July 2013 to 30 June 2016
The scheme commences on
1 July 2013
Relevant facts and circumstances
You were incorporated approximately 20 years ago and since inception have operated a business.
On or about your date of inception you acquired an asset which was used in your business since that time.
No amount was paid by you to acquire the asset.
You intend to sell the asset.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Act 1997 section 152-40
Reasons for decision
A CGT asset satisfies the active asset test if 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 ½ years during the period from when you acquired it until the earlier of the CGT event, or when you ceased business, if the relevant business has ceased to be carried on in the 12 months before the CGT event (section 152-35 of the Income Tax Assessment Act 1997 (ITAA 1997).
A CGT asset is an active asset at a time if, at that time you own the asset and it is used, or held ready for use, in the course of carrying on a business that is carried on by you (section 152-40 of the ITAA 1997). A CGT asset does not need to be active just before the CGT event.
The following assets cannot be active assets (subsection 152-40(4) of the ITAA 1997):
· interests in a connected entity (other than those satisfying the 80% test)
· shares in companies and interests in trusts (other than those satisfying the 80% test)
· shares in widely held companies unless they are held by a CGT concession stakeholder of the company
· shares in trusts that are similar to widely held companies unless they are held by a CGT concession stakeholder of the trust or other exceptions for trusts with 20 members or less apply
· financial instruments, including loans, debentures, bonds, promissory notes, futures contracts, forward contracts, currency swap contracts, rights and options, and
· an asset whose main use in the course of carrying on the business is to derive interest, an annuity, rent, royalties or foreign exchange gains. However, such an asset can still be an active asset if it is an intangible asset that has been substantially developed, altered or improved by the taxpayer so that its market value has been substantially enhanced or its main use for deriving rent was only temporary.
In your case, the CGT asset has been owned for more than 15 years and used in your business for the entire period. As such, the CGT asset satisfies the active asset test.