Private ruling: CGT - small business concessions
Date of advice: 15 December 2016
Published: May 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Do you meet the basic conditions of the small business CGT concessions on the sale of the property? | A1: Yes.

Relevant facts and circumstances: You acquired the property. The property was initially leased. You re-occupied the property, and operated a business from it. You reported the sales and expenses of the business. The property was owned for a period of less than 15 years. The business was operated from the premises for more than half the ownership period. You were a small business entity in the income year in which the CGT event occurred.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 152-10(1) | Income Tax Assessment Act 1997 Section 152-35

Reasons for decision: Summary: In order to access the small business concessions contained in Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997), the basic conditions (in addition to any conditions relevant to each specific concession) must be satisfied. Subsection 152-10(1) of the ITAA 1997 states that a capital gain you make may be reduced or disregarded under this Division if the following basic conditions are satisfied for the gain: (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; (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) of (1B) are satisfied in relation to the CGT asset in the income year; (d) the CGT asset satisfies the active asset test. In your case, a CGT event has occurred and the event has resulted in a capital gain. Further, the trust was a small business entity in the relevant income year. Therefore we need to consider if the active asset test is satisfied. The active asset test is contained in section 152-35 of the ITAA 1997. The active asset test is satisfied if: (a) 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 test period detailed below, or (b) you have owned the asset for more than 15 years and the asset was an active asset of yours for a total of at least 7.5 years during the test period. The test period is from when the asset is acquired until the CGT event. If the business ceases within the 12 months before the CGT event (or such longer time as the Commissioner allows) the relevant period is from acquisition until the business ceases. A CGT asset is an active asset if it is owned by you and is used or held ready for use in a business carried on (whether alone or in partnership) by you, your affiliate, your spouse or child, or an entity connected with you. In your case, the asset is considered an active asset as it was used in a business carried on by you. Further, as you have owned the asset for less than 15 years, and it was active for more than half that time, you meet the active asset test. Therefore, the trust meets the basic conditions to access the small business CGT concessions on the sale of the property.