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Edited version of private advice
Authorisation Number: 1052038590002
Date of advice: 27 September 2022
Ruling
Subject: Active asset
Question
Does the Property meet the active asset test according to subsection 152-35(1) of the Income Tax Assessment Act 1997 (ITAA 97) for the purpose of the capital gains tax small business concessions?
Answer
Yes. It is considered that the Property meets the active asset test. A substantial proportion of the Property, by area, has been used for specialist business purposes by a small business entity throughout the full ownership period, as well as some private use. A comparative analysis of the area of the property used and income derived from it has determined that the main use of the Property was not to derive rent, so the rent exclusion does not apply. Further information about the active asset test can be found by searching 'QC 52271' on ato.gov.au.
This ruling applies for the following period
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The Individual is the sole director and shareholder of the entity.
Over 25 years ago the entity became the registered proprietor of the Property.
The Individual, via the entity, has operated a business from the Property for almost 30 years.
Major modifications were made to the property to make it suitable to conduct the above business activities.
The individual wishes to simplify his affairs and has proposed that entity will transfer the Property to the individual during the income year.
The entity's turnover at all relevant times has been well under 2 million dollars.
The Property has been used by the entity in the course of the business from 1992 to present date of ruling. (Approximately 30 years).
Detailed plans of the dwelling show Xm2 of the Xm2 are used for business purposes (62% of the total dwelling). The outside area is used for both private and business purposes.
Financial Statements show that business income derived from the Property exceeds rental income derived from the Property in previous years for the entity.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-35