Private ruling: Active asset test - mixed use asset
Date of advice: 23 November 2022
Published: 23 January 2023
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Do you meet the basic eligibility conditions for the small business capital gains tax (CGT) concessions under section 152-10 and 152-35 of the Income Tax Assessment Act (ITAA 1997) in relation to the sale of your second title of land? | A1: Yes. You meet the basic eligibility conditions for the small business CGT concessions under section 152-10 and 152-35 of the ITAA 1997 because you made a capital gain on a CGT asset that you owned, the CGT asset was used in the course of carrying on a small business by your affiliate, and the CGT asset satisfies the active asset test. The Commissioner is satisfied that the main use of the asset was not to derive rent.

Relevant facts and circumstances: You purchased two titles of land from your parent. The first title was used by you and your spouse as your main residence and a portion of the land was leased out to a third party to carry on a farming business. The second title consisted of a house which was used by your spouse to run their consulting business since the date of purchase, and farmland that was rented out to a third party to carry out a farming business for several years leading up to the CGT event. The consulting business was carried out on the second title for many more years than the farmland was leased. Since the farmland was leased to a third party, the majority of the income derived from the second title was from the consulting business. You have since sold both titles of farmland and made a gain.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-47 | Income Tax Assessment Act 1997 section 328-130