Edited version of private advice

Authorisation Number: 1051954064540

Date of advice: 23 February 2022

Ruling

Subject: Small business concessions - active asset

Question

Does the property satisfy the active asset test for the purpose of the capital gains tax (CGT) small business concessions under section 152-35 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. Although a percentage of the property is used for the purpose of deriving rental income, the majority of the income earned from the property was from your business activities, and therefore, it satisfies the definition of an active asset in section 152-40 of the ITAA 1997.

Further information on active assets can be found by searching 'QC 52272' on ato.gov.au.

This ruling applies for the following period:

Income year ended 30 June 20XX

The scheme commences on:

1 June 20YY

Relevant facts and circumstances

You purchased a vacant block of land in the income year ended 30 June 19XX consisting of XXX square metres zoned mixed residential.

You established a dwelling on approximately 30% of the property in the income year ended 30 June 20BB.

This dwelling has been rented to unrelated third parties since with current rent received at $xx per week.

You established a business on the remaining 70% in the income year ended 30 June 20BB.

You have run the business from establishment until the present.

The turnover from this activity has averaged $A00,000 per year over the last 15 years.

A portion of the business property has been leased to an unrelated third party for most of your ownership with rent currently $yy per week.

Rent received from both the dwelling and leased component of the business property has averaged approximately $D0,000 per year.

You are a small business entity.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-35

Income Tax Assessment Act 1997 section 152-40