Edited version of private advice

Authorisation Number: 1052034568997

Date of advice: 15 September 2022

Ruling

Subject: Small business CGT concessions

Question

Does the Property satisfy the active asset test pursuant to section 152-35 of the Income Tax Assessment Act 1997 (ITAA 1997) and the meaning of active asset pursuant to section 152-40 of the ITAA 1997?

Answer

Yes. You acquired the Property in 20XX and it has been used in the course of carrying on a business by you and a connected entity for at least half of the ownership period. We do not consider that the exceptions in subsection 152-40(4) of the ITAA 1997 have any application in the circumstances. Therefore, the Property satisfies the active asset test in section 152-35 of the ITAA 1997 and the meaning of active asset in section 152-40 of the ITAA 1997.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You purchased a farming property.

You, your family members, and the family trust funds have carried on a primary production business on the Property in a variety of partnerships arrangements during the period of ownership.

For X years, you in partnership with your spouse and child used the Property to carry on a business.

For the remaining time, the Trust carried on a primary production business on the Property in partnership with other various entities ('Partnerships').

The Trust is a discretionary trust. The Trustee of the Trust is a corporate trustee.

The Trust deed provides that your child is an income beneficiary and that you, as a parent of an income beneficiary, are also an income beneficiary of the Trust.

During X income years the Trust generated losses and made no distributions of income or capital to you during those years.

The Trustee of the Trust will nominate you as being controller of the Trust for those income years.

You and your spouse were paid a monthly fee for the use of the land and for tending to the livestock present on the land when the Property was used to carry on a business by the Partnerships. You did not have any formal agreement in place with the Partnerships.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-35

Income Tax Assessment Act 1997 section 152-40

Income Tax Assessment Act 1997 section 152-78

Income Tax Assessment Act 1997 section 328-125(3)

Further issues for you to consider

This ruling has not considered the basic conditions which must be satisfied in order to apply the small business CGT concessions. More information is available on our website www.ato.gov.au by searching keywords 'concessions for small business' or Quick Code 'QC 22655'.