Private ruling: CGT small business rollover
Published: January 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Can you choose to obtain a roll-over under section 152-410 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to your sale of your commercial rental property? | A1: Yes

Relevant facts and circumstances: On 1 July 200X, you purchased your commercial property. From the time of its purchase until 30 June 200Y, you conducted a business from your property. From 1 July 200Y to 30 June 200Z, your property was leased to an unrelated party. From 1 July 200Z to 30 September 20XX, your company used your property to carry on a business. From 1 October 20XX to 30 September 20YY (the date of sale), you rented your property to unelated parties. Just before the sale, the sum of the net value of the CGT assets of yours, of any entities connected with you, of any affiliates of yours and/or entities connected with your affiliates did not exceed $6,000,000.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 152-10 | Income Tax Assessment Act 1997 Section 152-15 | Income Tax Assessment Act 1997 Section 152-35 | Income Tax Assessment Act 1997 Section 152-40 | Income Tax Assessment Act 1997 Section 152-410

Reasons for decision: Summary: Section 152-410 of the ITAA 1997 provides a small business roll-over that allows you to defer the making of a capital gain from a CGT event happening in relation to one or more small business assets if the basic conditions in Subdivision 152-A are satisfied for the gain. Section 152-10 of the ITAA 1997 lists the basic conditions for relief, which are: (a) a CGT event happens in relation to a CGT asset of yours in an income year; (b) the event would (apart from this Division) have resulted in the gain; (c) at least one of the following applies: (i) you are a small business entity for the income year; (ii) you satisfy the maximum net asset value test (see section 152-15); (iii) you are a partner in a partnership that is a small business entity for the income year and the CGT asset is an interest in an asset of the partnership; (iv) the conditions mentioned in subsection (1A) or (1B) are satisfied in relation to the CGT asset in the income year; (d) the CGT asset satisfies the active asset test (see section 152-35). Section 152-15 of the ITAA 1997 provides you satisfy the maximum net asset value test if, just before the CGT event, the sum of the net value of the CGT assets of yours, of any entities connected with you and/or of any affiliates of yours or entities connected with your affiliates does not exceed $6,000,000. Section 152-35 of the ITAA 1997 provides a CGT asset satisfies the active asset test where you have owned the asset for 15 years or less and the asset was an active asset of yours for a total of at least half of the period that begins when you acquired the asset and ends at the CGT event (at the latest). Section 152-40 of the ITAA 1997 provides a CGT asset is an active asset at a time if, at that time, you own the asset and it is used or held ready for use in the course of carrying on a business that is carried on (whether alone or in partnership) by you, your affiliate or another entity that is connected with you. In your case, you can choose to obtain a roll-over under section 152-410 of the ITAA 1997 in relation to your sale of your property because: (a) a CGT event happened in relation to this asset; (b) the event resulted in a gain; (c) you satisfied the maximum net asset value test; and (d) the CGT asset satisfied the active asset test in that you, your affiliate or another entity connected with you used your property in the course of carrying on a business for over 50% of your ownership period.