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Edited version of your private ruling
Authorisation Number: 1012541885256
Ruling
Subject: Deceased estate - small business concessions
Question
Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the time limit to allow the small business concessions to be applied to the disposal of the property that was held by the deceased prior to their death?
Answer
Yes.
This ruling applies for the following period:
Year ending 30 June 2014
The scheme commenced on:
1 July 2013
Relevant facts and circumstances
Prior to the deceased's death, the deceased held a joint interest in a property with a family member as tenants in common.
The property had been held in excess of 15 years and was used by the deceased in the operation of a business.
The deceased met the conditions for the small business concessions in relation to the property immediately prior to their death.
The beneficiaries of the estate continued to run the business operations following the deceased's death for a short period of time.
Based on advice from an industry expert, plans to dispose of the property and distribute proceeds to beneficiaries commenced.
The other owner of the property initially agreed to the disposal of the property; however they subsequently withdrew their agreement, asserting that they wanted to retain their share of the property.
The other owner of the property also refused to negotiate or discuss the matter directly with the executor of the estate or other family members, instead engaging a solicitor for all relevant dealings.
The executor of the estate subsequently also engaged legal counsel in relation to the matter and lengthy negotiations have been taking place.
An agreement was reached which resulted in the transfer of the titles between the estate and the other owner of the property. This has enabled the executor to commence arrangements to dispose of the property.
Some buyers have already informally expressed interest in the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 152-80
Income Tax Assessment Act 1997 Subsection 152-80(3)
Reasons for decision
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
· the deceased would have been able to apply the small business concessions themselves if they had disposed of the asset immediately prior to their death, and
· a CGT event happens within 2 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 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.
In this case, we consider that you have provided a reasonable explanation for the delay in the disposal of the property. A protracted legal dispute between the estate and the other owner of the property has impacted the sale of the property. We do not consider that allowing this request would cause the unsettling of others or that there is any mischief involved.
Accordingly, the Commissioner will exercise his discretion under subsection 152-80(3) of the ITAA 1997 to extend the time period.
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