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Edited version of your written advice
Authorisation Number: 1012854629673
Date of advice: 5 August 2015
Ruling
Subject: Small business CGT concessions
Question
Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 to extend the time limit to allow the small business capital gains tax concessions to be applied?
Answer
No.
This ruling applies for the following periods
Year ended 30 June 2014
Year ended 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
The scheme commences on
1 July 2013
Relevant facts and circumstances
The deceased purchased property prior to 20 September 1985.
The deceased farmed the property with their spouse.
Prior to their death, the deceased entered into an agreement with a third party.
The deceased died during the 20XX calendar year and the property was held in trust by the deceased legal personal representatives.
During the 20YY calendar year the legal personal representatives entered into contracts to sell the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 104-10(3).
Income Tax Assessment Act 1997 subsection 104-10(5).
Income Tax Assessment Act 1997 Division 152.
Income Tax Assessment Act 1997 section 152-80.
Income Tax Assessment Act 1997 subsection 152-80(1)(c).
Income Tax Assessment Act 1997 paragraph 152-80(1)(d).
Income Tax Assessment Act 1997 subsection 152-80(3).
Reasons for decision
Under Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997), small business CGT concessions are available to reduce or disregard a capital gain providing certain conditions are satisfied.
When an individual dies, section 152-80 of the ITAA 1997 allows their legal personal representative or a beneficiary of their estate to access the small business CGT concessions to the extent that the deceased would have been able to access them just before they died, provided the following conditions are met:
• that the CGT asset forms part of the estate of the deceased individual
• the asset devolves to the individual's legal personal representative or passes to a beneficiary of the individual
• the individual would have been entitled to reduce or disregard the capital gain under Division 152 of the ITAA 1997 if a CGT event had happened in relation to the CGT asset immediately before their death, and
• a CGT event happens in relation to the CGT asset within two years of the individual's death.
This two year time limit may be extended by the Commissioner under subsection 152-80(3) of the ITAA 1997.
Subsection 104-10(3) of the ITAA 1997 identifies that for disposal of assets (CGT event A1), the time of the CGT event is when the disposal contract is signed, not settlement. A gain made on the disposal of a CGT asset acquired prior to 20 September 1985 is disregarded under subsection 104-10(5) of the ITAA 1997.
In this case, the legal personal representatives entered into contracts to dispose of the property during the 20YY calendar year.
The deceased acquired the property before 20 September 1985, therefore had they disposed of the property prior their death any resultant capital gain would have been disregarded under subsection 104-10(5) of the ITAA 1997 and not under Division 152 of the ITAA 1997.
As the deceased would not have been entitled to reduce or disregard the capital gain under Division 152 as required by paragraph 152-80(1)(c) of the ITAA 1997, section 152-80 of the ITAA 1997 does not apply. The legal personal representatives or beneficiaries of their estate are also unable to access the small business concessions contained within Division 152 of the ITAA 1997. Accordingly, the Commissioner is unable to extend the two year period.
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