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Edited version of your written advice
Authorisation Number: 1051179500898
Date of advice: 10 January 2017
Ruling
Subject: Capital gains tax
Question 1
Is the property an 'active asset' for the purposes of the small business capital gains tax concessions?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 20ZZ
Year ending 30 June 20XY
The scheme commences on:
1 July 20YY
Relevant facts and circumstances
In 20XX you purchased the property.
The property is adjacent to your main residence.
The property is used by the trust. You are connected with the trust.
The trust carries on a business from your main residence.
The trust is a small business entity.
The trust has used the property for storage, advertising and car parking for customers since the property was purchased.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 152
Income Tax Assessment Act 1997 Subsection 152-35(1)
Income Tax Assessment Act 1997 Subsection 152-40(1)
Reasons for decision
Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997) provides the concessions that are available for Small Businesses.
Under subsection 152-35(1) of the ITAA 1997 a capital gains tax (CGT) asset will satisfy the active asset test if:
(a) you have owned the asset for 15 years or less and the asset was an active asset of your for a total of at least half of the test period, or
(b) you have owned the asset for more than 15 years and the asset was an active asset of your for a total of at least 7½ years during the test period.
The test period being when you acquired the asset and ends at the earlier of the CGT event and if the relevant business ceased to be carried on in the 12 months before that time - the cessation of the business.
Subsection 152-40(1) details that a CGT asset is an active asset at a time if it is used, or held ready for use, in the course of carrying on a business that is carried on by you, or your affiliate, or another entity that is connected with you.
Application to your circumstances
You have held the property for 15 years. Your CGT asset, the property, has been used in a business carried on by an entity that is a connected with you. The trust has been using the property in the course of carrying on a business for the entire ownership period.
As the property has been active for the entire ownership period, it satisfies the active asset test.