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Edited version of private advice
Authorisation Number: 1051896634673
Date of advice: 9 September 2021
Ruling
Subject: CGT active asset and 15 year exemption
Question 1
Does the boarding house qualify as an active asset under section 152-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes, the boarding house qualifies as an active asset under section 152-40 of the ITAA 1997.
Question 2
If the boarding house is an active asset, can the portion of the proceeds applicable to the boarding house be classed as exempt from capital gains tax (CGT) small business 15 year exemption under Subdivision 152-B of the ITAA 1997?
Answer
Yes, the portion of the proceeds from the disposal of the boarding house qualifies for the 15 year CGT exemption under Subdivision 152-B of the ITAA 1997.
This ruling applies for the following period:
30 June 20XX
The scheme commences on:
1 December 19XX
Relevantfactsand circumstances
You purchased a property in XXX 19XX.
You moved into the property in XXX 19XX where from this time XX% of the property has been used as your private residence and the remainder of the property has been used as a boarding house.
The average length of stay of your boarders is 4 to 6 weeks.
You have a list of house rules that boarders must adhere to.
You provide the following services/facilities to the boarders:
• Cleaning of bathrooms, general maintenance and management services.
• Supervise and control activities.
• Common areas (bathrooms and laundry), studio with self contained kitchen.
You provide linen to the boarders which is washed by you.
You pay all the utility bills.
You retired when you sold and settled the property in XXX 20XX.
You satisfy the maximum net value asset test.
Relevantlegislativeprovisions
IncomeTaxAssessment Act 1997
section 152-5
section 152-10
section 152-15
section 152-35
section 152-40
subsection 152-40(1)
paragraph 152-40(4)(e)
section 152-105
subsection 152-105(b)
subsection 152-105(d)