Capital Gain Tax

Question:

Background

The taxpayer is a family trust which has owned a small shopping centre with 5 shops for 25 years.

All shops have been leased out for the last 25 years. One shop has been leased to a related entity.

The family trust sold the shopping centre in August 2020 with a profit of 2 million dollars.

Tax Issue

Can the family trust claim 20% of the CGT exemption under The Small Business Active Asset Exemption (for the one shop that has been leased to the related entity)?

Answer

In the event the one shop is not on a separate title and only derives 20% of the total rentals received, we suggest that the shop in question will fail the active asset test.

This is because the main use of the shopping centre is to derive rent.

We do not have the full facts before us, and you may wish to apply for a private ruling or seek specialist advice.