| Disclaimer This edited version has been archived due to the length of time since original publication.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 written advice
Authorisation Number: 1051301045959
Disclaimer
You cannot rely on this edited version in your tax affairs. You can only rely on the advice that we have given to you or to someone acting on your behalf.
The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions.
Date of advice: 27 October 2017
Ruling
Subject: Capital gains Tax – Small Business Concession - Active Asset - Cash in bank
Question
Whether the balances in the bank account are inherently connected in a specified period of the business carried on by the Company as contemplated in subparagraphs 152-40(3)(b)(ii) and (iii) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No.
This ruling applies for the following periods:
Year ending 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
The Company was registered with ASIC.
The business has been operating since its’ registration.
The Company has several shareholders.
The shareholders wish to dispose their respective shareholding in the Company and will look to access the Capital Gains Tax (CGT) small business concessions.
The Company holds bank accounts. Limited transactions were carried out in these accounts for the period held by the company.
The ATO has not been provided with all the relevant information to determine the market value of the Company’s assets.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Act 1997 section 152-40
Income Tax Assessment Act 1997 subparagraph 152-40(3)(b)(ii)
Income Tax Assessment Act 1997 subparagraph 152-40(3)(b)(iii)
Unless otherwise stated, all legislative references are to the Income Tax Assessment Act 1997
Reasons for decision
Subdivision 152 sets out the conditions for eligibility to access the small business CGT concessions.
One of the basic conditions that must be satisfied by a taxpayer to be eligible for CGT small business relief is that the asset giving rise to the capital gain, for which tax relief is being sought, passes the active asset test in section 152-35.
The active asset test requires that the CGT asset be an active asset for at least half the period of its ownership. Active assets are defined in section 152-40.
In the present case, the CGT small business concessions will be available to the shareholders where the shares in the Company meet the active asset test. The active asset test will be met where the shares are active assets for at least half the period from when the shares in the Company were first acquired by the shareholders until they are transferred; or for 7.5 years if the shares were held for more than 15 years.
The shares in the Company will be active assets at any given time, where the total of the market values of the active assets of the Company, and the market value of any financial instruments and monies of the Company that are inherently connected with the business of the Company, are 80% or more than the market value of the total assets of the Company (“the 80% test”).
The fact pattern relevant to the bank accounts in this case could not be said to have been inherently connected with the business carried on by the Company as contemplated in subparagraphs 152-40(3)(b)(ii) and (iii) during the relevant period.