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Edited version of your written advice
Authorisation Number: 1012980719926
Date of advice: 4 March 2016
Ruling
Subject: Capital gains tax - small business concessions - active asset
Question 1
Does the property you own qualify as an active asset for the purposes of the small business capital gains tax concessions?
Answer
Yes.
This ruling applies for the following period:
Year ending 30 June 2016
The scheme commences on:
1 July 2015
Relevant facts and circumstances
The property was purchased in the 19XX-XX financial year.
The property was purchased with the intention of operating your business on.
After settlement of the property, the property was used in the course of carrying on a business.
Construction of your first shed was finalised in the 19XX-XX financial year. This was used to store machinery.
You constructed a second shed on the property.
The second shed was first used to derive rental income in the 20XX-XX financial year.
The property was used wholly and exclusively for the purposes of carrying on business for a period greater than 7.5 years. This period was from the date of settlement up until you started deriving rental income from the shed on the property.
You have owned the property for more than 15 years.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-35 and
Income Tax Assessment Act 1997 section 152-40.
Reasons for decision
The active asset test is contained in section 152-35 of the Income Tax Assessment Act 1997 ITAA 1997. The active asset test is satisfied if:
• you have owned the asset for 15 years or less and the asset was an active asset of yours for a total of at least half of the test period detailed below, or
• you have owned the asset for more than 15 years and the asset was an active asset of yours for a total of least 7.5 years during the test period.
The test period:
• begins when you acquired the asset, and
• ends at the earlier of
• the CGT event, and
• when the business ceased, if the business in question ceased in the 12 months before the CGT event (or such longer time as the Commissioner allows).
Therefore under section 152-35 of the Income Tax Assessment Act 1997 the property satisfies the active asset test because it was owned for more than 15 years and was actively used in your business for more than 7.5 years. Even though the property had alternate uses later in its life, it still satisfies the active asset test.