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Edited version of private advice
Authorisation Number: 1051540751572
Date of advice: 08 July 2019
Ruling
Subject: CGT small business concessions
Question 1
Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for you to choose to apply the 50% active asset reduction and small business retirement exemption to capital gains that arose in the XXXX and XXXX financial years?
Answer
Yes, an extension will be granted to XX/XX/XX.
The Commissioner considers that it would be appropriate to exercise the discretion in this case. You were not aware of your eligibility for the small business CGT concessions when you lodged your XXXX and XXXX income tax returns. There would be no prejudice to the Commissioner or unsettling of people by allowing the extension. There has been no mischief involved and the Commissioner considers it fair and equitable in these circumstances to exercise his discretion.
Question 2
Will the interests held by the taxpayer in the two properties satisfy the active asset test?
Answer
Yes, the interests held by you in the two properties satisfy the active asset test.
Based on the facts provided the Commissioner considers the company was your affiliate during the period where some of the partners in the partnership were the only controlling directors and shareholders of the company.
The company's main use of property 1 and property 2 was in relation to their business activity.
In relation to property 1, the company was your affiliate for at least 7 ½ years of your ownership period. In relation to property 2 the company was your affiliate for at least half of your ownership period, accordingly both properties satisfy the active asset test in section 152-40 of the ITAA 1997.
This ruling applies for the following periods:
Year ended 30 June XXXX
Year ended 30 June XXXX
The scheme commences on:
1 July XXXX
Relevant facts and circumstances
You are a partner in the partnership which at all times had the same partners.
The partners owned several properties as partnership assets which are the subject of this ruling request.
You were one of the directors of the company during the relevant period. You were a shareholder in the company during this period.
Decisions of the company are made by the directors jointly. No other entity had influence or control over the business affairs of the company.
For the relevant period, the controlling directors of the company, including you, were also the partners in the partnership. For this period, the directors were the only shareholders in the company.
The company operated a business and leased the properties from the partnership for the relevant periods.
At the time of lodging your XXXX and XXXX income tax returns, you were unaware of the small business concessions that may have been available to you.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 103-25(1)
Income Tax Assessment Act 1997 Section 152-10
Income Tax Assessment Act 1997 Section 152-35
Income Tax Assessment Act 1997 Subsection 152-40
Income Tax Assessment Act 1997 Section 328-130
Income Tax Assessment Act 1997 Section 995-1