Private ruling: Small business concessions - active asset test
Date of advice: 2 June 2023
Published: 24 July 2023
Ruling period: Financial year ending 30 June 2023
Date scheme commenced: 1 July 2022

Ruling: Q1: Does Property B satisfy the active asset test pursuant to section 152-35 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. During the relevant time of the Partnership's operation of the business, Property B was part Property B a single title property owned by you and your spouse jointly. It is therefore appropriate to consider the business use of the now two separate properties as a single property for the application of the active asset test. We accept that for a period of more than 7 1/2 years, Property B was used by you and your spouse in the course of carrying on the business in partnership, such that it was an active asset to you both during this period of time. Both you and your spouse owned Property B for more than 15 years and the asset was your active asset for more than 7 1/2 years during your ownership period. Consequently, the active asset test is satisfied for your original ownership interest in Property B. The interest held by your spouse in Property B also satisfied the active asset test at the time of their death.

Relevant facts and circumstances: You acquired the Property A jointly with your spouse more than 30 years ago. You and your spouse operating a business in partnership (the Partnership) for a period of more than 7 1//2 years. During the period the Partnership operated the business it used Property A solely for the purpose of operating its business. After the cessation of your business Property A was subdivided, with a separate title created for Property B. The main factory used in the business was located on what is now Property A, however, the two buildings on what is now Property B were also regularly used in the carrying on of the business. After the cessation of the business and Property A had been subdivided, Property A was transferred to a related entity. Your spouse recently passed away. You acquired their interest in Property B as surviving joint tenant at the time of their passing. You are selling Property B and your related entity is selling Property A. Although the properties are being advertised and sold as a single property over two titles, the small business concessions are to be applied to the sale of the Property B only.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-40