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Edited version of private advice
Authorisation Number: 1051742968213
Date of advice: 04 September 2020
Ruling
Subject: CGT - small business concessions (active asset)
Question
Does your interest in the property satisfy the active asset test in section 152-35 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. A substantial (although not a majority) proportion of the Property by area has been used for business purposes by connected entities of yours throughout your ownership period. In addition, your share of the business income derived from the Property by those entities significantly outweighs your share of the rental income. As the Property has been used for more than half of your ownership period in businesses carried on by connected entities of yours and the main use of the Property by you has not been to derive rent, your ownership interest in the Property satisfies the active asset test. Further information about the active asset test can be found by searching 'QC 52271' on ato.gov.au
This ruling applies for the following period
Year ended 30 June 2018
The scheme commenced on
1 July 2017
Relevant facts and circumstances
Person A and Person B (the Taxpayers) had an ownership interest in a commercial property (the Property), as part of a partnership (Partnership A).
The Property was owned for less than 15 years.
The Taxpayers are not connected to or affiliated with any of the other partners (except each other).
The Property was used in the business of ABC. Arm's length payments were made in accordance with an agreement for the use of the property. The taxpayers are not connected with ABC.
The Taxpayers also used the Property in a business where they are a 50% partner in a partnership (Partnership B).
Partnership B does not have a documented agreement to use the Property and no consideration is provided for the use of the property.
A substantial but not a majority of the Property by land area was used in the ABC business.
The business income from Partnership B's use of the Property has been significantly more than the rent paid by ABC.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Act 1997 section 152-40