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Edited version of private advice
Authorisation Number: 1051892285834
Date of advice: 14 September 2021
Ruling
Subject: CGT on rural property
Question
Will the property meet the active asset test?
Answer
Yes.
For the small business CGT concessions in Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997) to apply, the CGT asset must satisfy the active asset test in section 152-35 of the ITAA 1997. Where you have owned an asset for more than 15 years the active asset will be passed if the asset was used in a business carried on by you (including in partnership) for at least 7.5 years. In this case, the property was used solely in your primary production business for more than 7.5 years, accordingly, the property will meet the active asset test.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
On X XXXber 20XX, you purchased a rural property of XXX ha. named 'XXXX' located at XX XXX XXX XXXXX.
On X XXX 20XX, you registered for Goods and Services Tax (GST) and proceeded to prepare the property for primary production.
You, and the other partner live on another property and this was not used as a primary residence.
You planted XXXX XXXX trees, enlarged a dam, installed an irrigation system with XXX tree drip-irrigation and fenced the grove with animal proof fencing to protect it from wildlife. You constructed a large machinery shed to house farm equipment including a tractor, sprayer and fertiliser spreader. New electric fencing was installed around the pasture areas of the land, approx. XX ha. to facilitate grazing of livestock.
You purchased XXX to which you sold and made hay for fodder and sale.
The property's sole use as a primary production business was from XXX 20XX to XXX 20XX. After this date the primary production business did continue although also produced rental income from communication towers that were added to the property.
There are now XXXX XXXX on the property producing a rental income.
Due to environmental factors, limited capital and personal workloads the farm has not been a commercial success and a crop has not harvested.
The property was sold in XXX 20XX for $XXX,XXX.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 10-5
Income Tax Assessment Act 1997 Section 102-5
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Division 152