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Ruling

Subject: Extension of time request

Question

Will the Commissioner extend the 2 year time limit under paragraph 152-180(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

The deceased acquired land which was used to run a business.

The deceased's health deteriorated and they were unable to continue running the business.

The deceased's relatives continued to operate the business and maintained custodianship of the property until the deceased passed away.

The region experienced extreme weather conditions from this point in time up until the property was sold.

The property was placed on the market but due to the weather conditions it was not in a saleable condition and there were no interested buyers.

Efforts were made to bring the land into a more saleable condition. However these efforts were destroyed by further poor weather conditions.

The land was eventually sold more than 2 years after the deceased passed away.

The deceased would have been entitled to apply the small business capital gains tax concessions just prior to their death.

Reasons for decision

Summary

Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 152-80(3) of the ITAA 1997 and allow an extension to the time limit.

Detailed reasoning

When a taxpayer acquires a CGT asset, including acquisition by inheritance, they are potentially liable for tax on any capital gain on that asset when a CGT event subsequently happens to it.

In some instances, a taxpayer can reduce the capital gain made from a CGT event by applying the small business CGT concessions. Section 152-80 of the ITAA 1997 potentially extends the availability of the small business CGT concessions to an asset held by a legal personal representative or beneficiary of a deceased estate, to the extent that the deceased would have been entitled to the concessions, if a CGT event happens to the asset within two years of the death.

Section 152-80 of the ITAA 1997 allows either the legal personal representative of an estate or the beneficiary to apply the small business CGT concessions in respect of the sale of the deceased's asset in certain circumstances.

Specifically, the following conditions must be met:

· the asset devolves to the legal personal representative or passes to a beneficiary, and

· the deceased would have been able to apply the small business concessions themselves immediately prior to their death, and

· a CGT event happens within two years of the deceased's death unless the Commissioner extends the time period in accordance with subsection 152-80(3) of the ITAA 1997.

In this case, the property passed to the executors of the estate. As the deceased would have been able to apply the small business concessions to the land had he/she disposed of this land immediately prior to his/her death, the executors would also have had access to the concessions had they disposed of the land within two years of the deceased's death.

In determining whether the discretion to allow further time would be exercised, the Commissioner has considered the following factors:

· evidence of an acceptable explanation for the period of the extension requested (and whether it would be fair and equitable in the circumstances to provide such an extension)

· prejudice to the Commissioner which may result from the additional time being allowed (but the mere absence of prejudice is not enough to justify the granting of an extension)

· unsettling of people, other than the Commissioner, or of established practices

· fairness to people in like positions and the wider public interest

· whether any mischief is involved, and

· consequences of the decision.

Application to your circumstances

In this case, the executors attempted to sell the property, but due to poor weather conditions the land was not in a saleable condition and there were no interested buyers. Efforts were made to bring the land into a more saleable condition, however further difficult weather conditions destroyed these efforts. The property was finally sold more than two years after the deceased passed away.

The Commissioner is able to apply an extension of time where there is a reasonable explanation for an extension.

Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 152-80(3) of the ITAA 1997 and allow an extension to the time limit. Allowing an extension is not prejudicial to the Commissioner in this case nor is it unfair to other people in similar positions.

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