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Edited version of private advice
Authorisation Number: 1052348004977
Date of advice: 10 January 2025
Ruling
Subject: Active asset
Question 1
Was the Property and active asset for the purpose of section 152-40 of the Income Tax Assessment Act 1997 during the period ended 30 June 20xx?
Answer 1
Yes.
This ruling applies for the following period:
1 July 20xx - 30 June 20xx
The scheme commenced on:
1 July 20xx
Relevant facts and circumstances
The Taxpayer acquired a rural property about 10 years ago (Property).
The Property has been used since acquisition for the purpose of a primary production business (Business) carried out by the trustee of a discretionary trust (Trustee).
The Taxpayer is the sole director and shareholder in the Trustee and is the Appointor nominated in the Trust Deed of the discretionary trust with the powers to remove and appoint trustees, to approve the exclusion of a beneficiaries or nomination of an additional beneficiary, and to consent to amendments of the Trust Deed.
The Business is a mixed farming business.
The Trustee rotates the arable parts of the Property between its operations. This system helps reduce diseases and control cropping. It is considered a low- risk low-cost system.
In the income year ended 30 June 20xx some of the operations were carried out under a share farming arrangement with a Sharefarmer.
The Trustee and the Sharefarmer had a verbal agreement as to the obligations and responsibilities of each party during this period.
The area used for the share farming activities took up a small percentage of the whole arable part of the Property.
Subsequent to the period ended 30 June 20xx the Property returned to a full grazing phase.
The Taxpayer intends to sell the Property in the near future.
A capital gain will be made on the sale and the Taxpayer will seek to reduce the capital gain by the concessions in Division 152 of the Income Tax Assessment Act 1997.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 152-A
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Act 1997 section 152-40
Income Tax Assessment Act 1997 subsection 152-40(1)
Income Tax Assessment Act 1997 subsection 152-40(2)
Income Tax Assessment Act 1997 section 152-47
Income Tax Assessment Act 1997 section 328-125
Income Tax Assessment Act 1997 subsection 328-125(1)
Income Tax Assessment Act 1997 subsection 328-125(3)
Income Tax Assessment Act 1997 subsection 328-125(5)