Private ruling: Capital Gains Tax (CGT) - small business concessions - active asset and partner in a partnership
Published: July 2011
Ruling period: 1 July 2010 to 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Is an individual who is a partner in a partnership which conducts a business, also conducting a business in their own right as an individual for the purposes of subparagraph 152-40(1)(a)(i) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: You owned an interest in a commercial property purchased in the financial year ended 30 June 2001 in order to continue the partnership business at a new location. The property was leased to a business conducted as a partnership with all of the property owners being partners in the partnership business. The property was contracted for sale in the financial year ended 30 June 2011.

Relevant legislative provisions: Income Tax Assessment Act 1997 subparagraph 152-40(1)(a)(i).

Reasons for decision: Summary: Subsection 995-1(1) of the ITAA 1997 defines a partnership as an association of persons (other than a company or a limited partnership) carrying on business as partners or in receipt of ordinary income or statutory income jointly. A partnership is not a separate legal entity. Subparagraph 152-40(1)(a)(i) of the ITAA 1997 states that 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. | Detailed Reasoning - Application to your circumstances: As the partnership is not a separate legal entity, when you carry on a business in partnership, you, an individual are considered to be conducting a business. Note: Only the question stated under the above Question heading has been addressed.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Does Part IVA apply to this ruling?: Part IVA of the Income Tax Assessment Act 1936 is a general anti-avoidance rule that can apply in certain circumstances if you or another taxpayer obtains a tax benefit in connection with an arrangement and it can be concluded that the arrangement, or any part of it, was entered into or carried out by any person for the dominant purpose of enabling a tax benefit to be obtained. If Part IVA applies the tax benefit can be cancelled, for example, by disallowing a deduction that was otherwise allowable. | We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part. | If you want us to rule on whether Part IVA applies we will first need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply. | For more information on Part IVA, go to our website www.ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select: Part IVA: the general anti-avoidance rule for income tax.