Edited version of private advice

Authorisation Number: 1051745328024

Date of advice: 26 August 2020

Ruling

Subject: Small business concessions

Question

Is the property an active asset for the purposes of section 152-35 of the Income Tax Assessment Act 1997 (IATT 1997)?

Answer

Yes. The Commissioner accepts that you were holding the property ready for use in the course of carrying on a business.

As the company has an aggregated turnover of less than $XXX in the income year in which the capital gains tax (CGT) event occurred, it is a CGT small business entity in that income year.

The property has been owned by the company for less than XX years and since acquisition the property was intended to be used in the company's business activities. Therefore, the property satisfies the active asset test as for at least half of the test period the property was intended to be used in the company's business activities.

Accordingly, the company has met the basic conditions to apply the small business CGT roll-over concession. For more information please see QC 52291 on ato.gov.au.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The company is an Australian Private Company the was registered in XXXX.

The company has sole director (the director).

The director's parents were appointed power of attorney(s), authorising them as attorney(s) to do on the director's behalf anything that they may lawfully authorise an attorney to do.

In XXXX, the director, purchased the property which is XX acres in size.

The company wrote a business plan for the property.

Prior to purchase, the property had been neglected.

In order to bring the property into a productive state for farming activities the property required extensive rehabilitation works.

The business plan advises the purchase of the property was based solely on a commercial decision to diversify the company's financial interests.

The company intended to operate breeding and rearing of sheep and lambs with additional vegetable farming activities on the land of the property to derive income, which is supported by the business plan.

The director sold their main residence in order to prepare to build their main residence on the property.

A builder was engaged for the construction of a replacement main residence on the property.

When the property was purchased it was zoned by local Government as 'Intensive Agriculture' where a dwelling was a 'Permitted Use'.

At purchase, the property did not come with 'Permit Conditions' or restrictions.

In XXXX the local council introduced an 'Interim Planning scheme'. This changed the zoning of the property.

The director advises that they were not made aware of the zoning change until they applied for a house building permit to build their main residence on the property.

The director corresponded with the builder regularly on the zoning issues.

The council subsequently denied the directors house building application.

The director and their attorney(s) attempted to have the zoning issue rectified with interactions with multiple Local Politicians, Federal Politicians, State Politicians, Councillors, Premier, State Opposition Leader, Senator, Mayors and deputies Mayors.

The director and their attorney(s) also sent correspondence to Anti-Discrimination Commissioner, Government Ombudsman and the Australian Human Rights Commission however they were unfortunately not able to assist with this matter.

The company has lodged company income tax returns with the Australian Taxation Office (ATO).

The income for the company is less than $XXX dollars per year.

The property has been intended to be used in the company's business for at least half of the active asset test period.

The property was sold creating a capital gain.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 subsection 152-35

Income Tax Assessment Act 1997 subdivision 152-C