The small business concessions

Q: A client has a trust and bought a motel property in 2003, including the building and the land, for $500,000. They planned to run the motel but had to close it due to unexpected problems. They eventually sold the land for $1.5 million. Do they qualify for small business concessions, even if they didn't run the motel business?

A: Usually, to qualify for small business concessions, you need to have an active asset, like a property used in a business. But there are three issues here:

1. Proving Intentions: The client needs to show they planned to run the motel. They'll need solid evidence of this, like explaining the problems they faced and what steps they took to start the business.

2. Using the Asset for Business: An active asset needs to be used or ready to use for a business. Just planning to start a business might not be enough. There needs to be a real business happening.

3. Failing the Active Asset Test: Even if the motel was intended for business, it might not meet the active asset test. It seems the property was mainly rented out, not used for a business, for most of the time they owned it.

These issues could affect their eligibility for small business concessions. They should gather evidence to support their case.

Here's a simpler version:

Q: A client has a trust and bought a motel property in 2003, including the building and the land, for $500,000. They planned to run the motel but had to close it due to unexpected problems. They eventually sold the land for $1.5 million. Do they qualify for small business concessions, even if they didn't run the motel business?

A: Usually, to qualify for small business concessions, you need to have an active asset, like a property used in a business. But there are three issues here:

1. Proving Intentions: The client needs to show they planned to run the motel. They'll need solid evidence of this, like explaining the problems they faced and what steps they took to start the business.

2. Using the Asset for Business: An active asset needs to be used or ready to use for a business. Just planning to start a business might not be enough. There needs to be a real business happening.

3. Failing the Active Asset Test: Even if the motel was intended for business, it might not meet the active asset test. It seems the property was mainly rented out, not used for a business, for most of the time they owned it.

These issues could affect their eligibility for small business concessions. They should gather evidence to support their case.

If you have any questions, feel free to contact Tax Ideas Accountants & Advisers. You can also book an appointment through our live calendar.