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Edited version of your private ruling
Authorisation Number: 1012469202931
Ruling
Subject: Capital gains tax
Question 1
Will the Commissioner exercise his discretion in relation to the active asset test and extend the time period?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 2012
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You acquired a X% share in a property.
You conducted a business on the property in partnership.
You ceased to be a partner in the business during the 200X financial year.
The property was apart of a legal dispute and negotiations were lengthy.
You suffered ill heath which further delayed negotiations.
The property was eventually put on the market during the relevant financial year. It was sold in the subsequent financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 152-35; and
Income Tax Assessment Act 1997 Subparagraph152-35(2)(b)(ii).
Reasons for decision
The active asset test is contained in section 152-35 of the ITAA 1997. The active asset test is satisfied if:
· you have owned the asset for 15 years or less and the asset was an active asset of yours for a total of at least half of the test period detailed below, or
· you have owned the asset for more than 15 years and the asset was an active asset of yours for a total of least 7.5 years during the test period.
The test period:
· begins when you acquired the asset, and
· ends at the earlier of
- the CGT event, and
- when the business ceased, if the business in question ceased in the 12 months before the CGT event (under subparagraph 152-35(2)(b)(ii) of the ITAA 1997 the Commissioner can allow a longer period than 12 months).
In this case, the property was an active asset up until you ceased to be a partner during the 200X financial year. The property was sold in the subsequent financial year, which is more the 12 months after you ceased business. The active asset test will only be satisfied if the Commissioner allows a longer period under subparagraph 152-35(b)(ii) of the ITAA 1997.
In determining if the discretion to allow a period longer than 12 months should be exercised, the Commissioner considers the following factors:
· whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension;
· whether there is any prejudice to the Commissioner if the additional time is allowed, however the mere absence of prejudice is not enough to justify the granting of an extension;
· whether there is any unsettling of people, other than the Commissioner, or of established practices;
· fairness to people in like positions and the wider public interest;
· whether there is any mischief involved; and
· the consequences of the decision.
After considering the relevant factors against your circumstances, it is considered that you have provided a reasonable and acceptable explanation for the delay in disposing of the property. The Commissioner will exercise the discretion set out under section 152-35(2)(b)(ii) of the ITAA 1997 and extend the time period.
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