Private ruling: Active asset
Date of advice: 7 November 2023
Published: 18 December 2023
Ruling period: 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is your entire land an active asset under section 152-40 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. Having considered your full circumstances, it is accepted that all of your land is an active asset for the purposes of subsection of 152-40(1) of the ITAA 1997. The land was used in the business of Partner A, to generate their business assessable income.

Relevant facts and circumstances: You purchased a vacant land on a specified date with the sole intention of building a kiln building and studio. The purpose of the studio was to provide accommodation for your students and Partner A. You received the Occupation Certificate on a specified date from the council, which is the date that you commenced business. You cleared part of the land and established a kiln and teaching space in the area, and the rest remained untouched until the entire area was sold. Uncleared land was not used for any other purposes other than maintaining a space from the neighbourhoods. The operation of the kiln generates a large amount of smoke, which necessitated you to locate the business operation far away from the urban area. The kiln is large in internal volume. A single firing takes 3 to 4 days to finish and consumes about 12-15 tonnes of wood, producing significant amounts of smoke during the firing process. The studio is mainly used by Partner A 3-4 days per week along with the 3-4 day firings for your team of a specified number of people. The team consisted of students and volunteers for shift work during firing to feed wood into the kiln continuously every 5 minutes. The studio was never used for any other purpose other than your art practice and teaching. The land was used to generate business income under Partner A's ABN. The income came from participating in occasional exhibitions and some teachings. You have maintained your principal residence in a different location throughout the whole period until June 20XX. You entered into a contract to sell your property on a specified date for a specified amount.

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