Tax, Active Assets and Small Business Concessions

Posted On: Thursday, February 14, 2019

Q: Purchase of farming property in May 2013 for $1,600,000 in the family trust. The family trust is a business of primary production. This 160-acre property has since been rezoned to residential R1 and approximately 800 lots will be available for sale at 550 sq. metre minimum lot sizes.

We plan to sell the 160-acre property prior to development with the Development Control Plan approval by council in approximately 12 months’ time.

My question is, will this property sale be taxed as an active asset being able to access the small business concession. Our income is gross $400,000pa. well below the threshold to qualify.

Answer

Given the turnover the capital gains tax small business concessions can be accessed if we are dealing with active assets. In the event you have genuinely conducted a business of primary production and the land has not been mixed use… i.e. partly used for agistment, then the property would appear to be an active asset. Note that in your case the land must have been an active asset (i.e. used in a business) for at least half the period of ownership. Also “passive income” such as agistment does not meet this test. Of course, if you did the subdivision yourself, there could be problems, but we note the plan is to sell the land before then.

We stress however that specialist advice should be sought as we do not have the full facts and circumstances.

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