Private ruling: Capital gains tax - small business concessions - active asset
Date of advice: 4 March 2016
Published: April 2016
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Does the property you sold qualify as an active asset for the purposes of the small business capital gains tax concessions? | A1: No.

Relevant facts and circumstances: You and your spouse purchased a commercial property in the 19XX calendar year. The property was leased out as a retail outlet until it was sold in the relevant financial year. You have owned the property for a number of years.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 152-40(4).

Reasons for decision: Summary: This property does not qualify as an active asset, under subsection 152-40(4) of the ITAA 1997, as its main use was to derive rent. Furthermore in the case of Jakjoy Pty Ltd v Federal Commissioner of Taxation [2013] AATA 526; 2013 ATC 10-328; (2013) 96 ATR 185 the taxpayer owned multiple commercial investment properties and argued it was carrying on a leasing business and the properties should therefore be treated as active assets for the purposes of the small business CGT concessions. The case went before the Administrative Appeals Tribunal (AAT), and it was determined that the properties were not active assets. Even though the taxpayer was carrying on a property leasing business, the fact that the properties were rented out, to derive passive rental income meant that they were not capable of being active assets.