Private ruling: CGT - connected entities and active asset
Date of advice: 18 December 2018
Published: April 2019
Ruling period: 1 July 2018 to 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Are Trust A and Trust B connected entities under Section 328-125 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. Having regard to all circumstances and subsection 328-125 of the ITAA 1997, Trust A and Trust B are connected entities. | Q2: Does the sale of its business real property satisfy the definition of an ‘Active Asset’ under Section 152-40 of the ITAA 1997? | A2: Yes. The business real property satisfies the conditions of the active asset test as Trust A and Trust B are connected entities, the asset has been used for a total of at least 7.5 years in the course of carrying on its business and the main use of the asset was not to derive rent. Further information on the active asset test can be found by searching 'QC 52271' on ato.gov.au

Relevant facts and circumstances: X is the Trustee and appointor of Trust A. X is the sole director and shareholder of Company A as trustee for Trust B. Trust A owns a real property leased to Trust B who operates the business from the premises since the date of acquisition being 20xx. Trust A is considering disposing of the property to a third party. Most of the property is used for the purpose of running the business and some part is for recreational use for Trust B employees and X family. This area has been used for business storage in the past. You provided a copy of the plan of the property.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 328-125 | Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-40