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Edited version of private advice
Authorisation Number: 1051856320003
Date of advice: 25 June 2021
Ruling
Subject: Small business concessions - active asset
Question 1
Is the taxpayer a CGT small business entity under subsection 152-10(1AA) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. The taxpayer satisfies the requirements to be a small business entity in the relevant income years.
The business activity meets the indicators of carrying on a business in Taxation Ruling 97/11. The activity has a significant commercial purpose or character. The taxpayer has a purpose of profit as well as a prospect of profit from the business activity. There is repetition and regularity of the business activity as well as permanency. The activity is planned, organised and carried on in a businesslike manner.
Question 2
Is the property an active asset under section 152-40 of the ITAA 1997?
Answer
Yes. The property is an active asset. While the property was also used to derive rental income from tenants, the majority of the income derived by the Trust from the use of the Property was and is derived from the Trust's business activities on the land. The income from this activity significantly exceeded the rental income received from the remaining part of the property and did so over a long period of time..
This ruling applies for the following periods:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The taxpayer has conducted activities at the property since 19XX.
The taxpayer gives other parties the right to occupy the property to operate their own business activities from time to time for a fee. The fee is not considered to be rental income.
The taxpayer has employed management staff over the years to manage the property. The staff maintain financial records, invoice other parties, collect the income, follow up debtors, pay all bills, and clean and maintain the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 152-10
Income Tax Assessment Act 1997 Section 152-40
Income Tax Assessment Act 1997 Section 328-110