Edited version of private advice

Authorisation Number: 1051913748267

Date of advice: 17 February 2022

Ruling

Subject: Small business concessions - active asset

Question 1

Is the company a CGT small business entity under subsection 152-10(1AA) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. The Company satisfies the requirements to be a small business entity in the relevant income years.

We consider that they operate the market as a business. As the activity has a significant commercial purpose or character, these markets operate for a profit-making purpose, there is repetition and regularity of the market activity as well as permanency where the markets are operated twice weekly. The activity is planned, advertised and marketed, organised and carried on in a businesslike like manner, where the market activity meets many of the indicators of carrying on a business in Taxation Ruling 97/11.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The company purchased a block of land the (Property). You believe that the property is an active asset and it has been used for more than half its ownership in a business activity and the company has an aggregated turnover of less than $X million per year.

The Property is used to conduct Markets. There is repetition and regularity of the markets, as well as a permanency, as the Markets are held in the same location twice a week.

It operates as outdoor food market where visitor's buy freshly cooked food from venders, sit at tables and chairs which are provided and listen to music and entertainment and as also local farmers bring fresh produce from around the district for a Farmer's Market.

The Market is heavily advertised by the Director as a relaxed celebration of food, music, and good. It is advertised and marketed on its own web site as well as other websites which promote local markets within the area.

On its own fully functioning website, it provides stallholders information and forms they can download if they are considering to be a stallholder.

The company's director is involved in organising entertainment and ensuring the market grounds are clean and well presented to the public.

Stallholders are required to pay a site fee to use the land to sell their goods as well as a utilities fee for the use of electricity at the site, there are also rules, permits, insurances and conditions of entry that each stallholder must abide with when operating at the Market.

Stallholders have a verbal agreement with the company acknowledging that they only have a right to occupy the land under certain conditions when they are operating stalls at the markets. You believe this agreement is not that of landlord and or tenant under a rental agreement, and the income paid by stallholder is not considered to be passive income or rent.

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