Eichmann decision lifts the bar on active asset test - 2 March 2020 has been saved
Eichmann decision lifts the bar on active asset test - 2 March 2020
A recent decision of the Federal Court addressed the question of whether an asset (a block of land) was sufficiently connected to business operations so as to qualify as an active asset. The decision of Derrington J in Commissioner v Eichmann was handed down in December 2019 in favour of the Commissioner.
The relevant question was whether the land was used in the course of carrying on a business. The approach adopted by the Court has posed the active asset test as an extremely onerous one requiring that the asset and its use have a “direct functional relevance to the carrying on of the normal day-to-day activities of the business”.
The matter arose in the context of the small business concessions in Division 152 of the Income Tax Assessment Act 1997 (ITAA 97), but the same issue is also relevant to the CGT participation exemption in Subdivision 768-G, ITAA 97.