Capital Gains Concessions on Vacant Residential Land

Under the Small Business Capital Gains Tax concessions you can reduce the capital gain derived from the sale of an "active asset" by 50% (in addition to the 50% CGT discount if you've owned it for 12 months or more).

We often get asked by builders if this concession applies to sale of vacant land that was used to store materials and equipment e.g scaffolding and fencing. A recent case determined that where "vacant" residential land had materials and tools located on it for storage purposes was deemed to be an active asset. This ruling from the Administrative Appeals Tribunal overturned the decisions from the Commissioner of Taxation, meaning that the small business CGT concessions could be applied.

This case is one of many cases that deals with the grey area on whether unimproved land qualifies for as an active asset. The clear outcome of this case relies on the interpretation of "used in the course of carrying on a business". This interpretation by the Commissioner of Taxation was determined to be inaccurate by the AAT.