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This edited version has been archived due to the length of time since original publication.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: 1051380199470

Date of advice: 4 June 2018

Ruling

Subject: Small business active asset test

Question

Did the Asset satisfy the active asset test in section 152-35 of the Income Tax Assessment Act 1997 at the time of the CGT event?

Answer

No.

This ruling applies for the following period:

1 July 2014 to 30 June 2018

The scheme commences on:

1 July 2014

Relevant facts and circumstances

Company A purchased the Asset in January 2015 and sold the Asset in February 2018 for a gain.

The main use of the Asset by Company A was to derive rent.

Relevant legislative provisions

Section 152-35 of the Income Tax Assessment Act 1997.

Reasons for decision

All legislative references are to the Income Tax Assessment Act 1997 unless otherwise stated.

Section 152-35 states:

(1) A *CGT asset satisfies the active asset test if:

      (a) 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 period specified in subsection (2); or

      (b) 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 1 / 2 years during the period specified in subsection (2).

    (2) The period:

      (a) begins when you *acquired the asset; and

      (b) ends at the earlier of:

        (i) the *CGT event; and

        (ii) if the relevant business ceased to be carried on in the 12 months before that time or any longer period that the Commissioner allows--the cessation of the business.

An ‘active asset’ is defined in section 152-40.

However, certain CGT assets cannot be active assets even if they are used in the course of carrying on a business. Relevantly, subsection 152-40(4)(e) excludes assets whose main use is to derive rent (unless such use was only temporary).

The main use of the Asset by Company A was to derive rent and subsection 152-40(4)(e) excludes the Asset from being an active asset.

Accordingly, the Asset will fail to meet the active asset test under section 152-35.


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