ATO ID 2005/218: Capital gains tax: roll-over to wholly owned company - business asset - part use
Date of decision: 4 July 2005
Year of income: Year ended 30 June 2005
Business line: Public Groups and International

Issue
Is an asset which is partly used in a taxpayer's business an 'asset of a business' for the purpose of the table in section 122-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. An asset which is partly used in a taxpayer's business is an 'asset of a business' for the purpose of the table in section 122-15 of the ITAA 1997.

Facts
The taxpayer is a sole trader running a business. The taxpayer owns a commercial building part of which is used as a retail outlet for the taxpayer's business. The rest of the building is rented out by the taxpayer to two other unrelated businesses. The taxpayer is considering transferring assets to a wholly owned company and choosing roll-over relief under Subdivision 122-A of the ITAA 1997.

Reasons for decision
Summary: Section 122-15 of the ITAA 1997 provides that an individual can choose to obtain a roll-over in certain circumstances if one of the specified CGT events occurs. The disposal to a company of a CGT asset, or 'all the assets of a business', is (are) a CGT event(s) to which this provision applies. The term 'all the assets of a business' is not defined in Subdivision 122-A of the ITAA 1997. The question is whether an asset used partly in a business and partly for other purposes is nevertheless an 'asset of a business' for the purpose of the roll-over in section 122-15 of the ITAA 1997. There is no main use test within Subdivision 122-A of the ITAA 1997. An asset used partly in a business as in the circumstances of this case and partly for other purposes is therefore an asset of the business for the purpose of the roll-over in section 122-15 of the ITAA 1997.

Legislative references: Income Tax Assessment Act 1997 Subdivision 122-A section 122-15
Subject references: Capital gains Capital gains tax CGT assets CGT roll-over relief