Private ruling: Small business concession and the active asset test
Date of advice: 20 November 2017
Published: April 2018
Ruling period: 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Does the property pass the active asset test as set out in section 152 - 35 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes | Q2: Are you eligible for the small business 50% active asset reduction for the purposes of applying the small business concessions set out in subdivision 152 - C of the Income Tax Assessment Act 1997 (ITAA 1997)? | A2: Yes Having considered your circumstances and the relevant factors, the property is an active asset under subdivision 152-A of the ITAA 1997. You satisfy the active asset test as it was actively used in your business for more than half the period of ownership, even though the property was not used in your business before it was disposed of. You satisfy the basic conditions and can apply the small business 50% active asset reduction. Further information on the relevant factors and small business concessions can be found on our website ato.gov.au and entering Quick Code QC22165 into the search bar at the top right of the page.

Relevant facts and circumstances: You are a small business entity operating as a discretionary family trust that was carrying on a business activity and your aggregated turnover was less than $2 million. In 20XX you acquired vacant land for the specific purpose of building a facility. You built this facility (the property) and completed the construction in 20XX, when the date of occupancy certificate was issued. It was at this time the asset was in a state of preparedness for use in the business and functionally operational. In 20XX you sold the business and kept the property. From 20XX up until 20XX, the property was rented. In 20XX the property was sold. You ran a business from the property you owned and then rented it to an unrelated party before selling.

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