Edited version of private advice

Authorisation Number: 1051523553250

Date of advice: 3 June 2019

Ruling

Subject: Capital gains tax - small business concessions - small business 50% active asset reduction - small business retirement exemption

Question 1

Is the Land an active asset for the purposes of the small business concessions under section 152-35 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. Based on the information provided, you satisfy the conditions of the active asset test. Further information can be found by searching for Quick code 'QC 52271' on our website www.ato.gov.au.

Question 2

Are you eligible to apply the small business 50% active asset reduction to any capital gain made on the sale of the Land under Subdivision 152-C of the ITAA 1997?

Answer

Yes. Based on the information provided, you are eligible to apply the 50% active asset reduction to reduce the capital gain made on the sale of the Land. Further information can be found by searching for 'QC 52289'.

Question 3

Are you eligible to apply the small business retirement exemption to any capital gain made on the sale of the Land under Subdivision 152-D of the ITAA 1997?

Answer

Yes. In this case you are under 55 and based on the information provided you satisfy the basic conditions. You are eligible to reduce your gain by applying the small business retirement exemption up to your life time limit of $500,000. As you are under 55 years old you must make a personal contribution equal to the exempt amount into a complying superannuation fund or retirement savings account, you must also keep a record of the amount you choose to disregard. Further information can be found by searching 'QC 52290'.

This ruling applies for the following period:

Income year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You commenced operating a hire service business a number of years ago, which is still ongoing.

You provide equipment to various locations with the storage of the equipment changing on a daily basis according to various requirements, such as the location of customers. You utilise various spaces from associates and other businesses, which is ongoing and standard practice in your industry. It is common in your industry to have multiple storage locations where equipment and trucks are kept. Storage in the industry may involve a period of X hours when the equipment is left and then picked up, which occurs frequently.

You entered into a contract to purchase the Land a number of months after the business commenced.

You planned to store your equipment on the Land and to broaden your activities and use the Land in relation to conducting other activities associated with your industry in addition to the construction of a warehouse on the Land.

You put temporary fencing around all sides of the Land and commenced actively using the Land as required in your business.

You held the Land for X years while you were attempting to accumulate the funding to undertake the construction of the warehouse on the Land.

You sold the Land and made a capital gain on its disposal.

You are a small business entity with an aggregated turnover of less than $X million.

You were under 55 years of age when the Land was sold.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subdivision 152-A

Income Tax Assessment Act 1997 Subdivision 152-C

Income Tax Assessment Act 1997 Subdivision 152-D