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Edited version of your written advice
Authorisation Number: 1013071735606
Date of advice: 15 August 2016
Ruling
Subject: Capital gains tax
Question 1
Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the two year period?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 200X
Year ended 30 June 200X
Year ended 30 June 200X
The scheme commences on:
1 July 200X
Relevant facts and circumstances
The deceased passed away in 200X.
The deceased and a relative carried on a primary production business on primary production land which they owned jointly over four titles.
As instructed by the deceased's will the estate assets were to be utilised by the trustees for the benefit of the relative for their lifetime. The deceased's interest in the farming land would then be past to the beneficiaries who are also the trustees of the estate.
The relative continued to run the primary production business after the deceased's death.
At no time since the deceased's death did you use the primary production property for any use other than for the benefit of the relative until their death.
The relative passed away in 200X.
The title of the land was not passed to you and was sold in your capacity as trustee.
After the deceased and the relative passed away you did not used the primary production land other than to house stock and plant until you were able to undertake an orderly sale of all livestock, plant and equipment and the properties themselves.
You advised the four properties were put on the market as soon as possible. You also said that drought conditions in the area caused a delay in finding a buyer for the properties and that at the time there was a lack of movement in rural properties.
Settlement occurred for all four properties in 200X.
You are considering accessing a small business capital gains tax concession which is the reason for your private ruling request for an extension of time.
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 Income Tax Assessment Act 1997 (ITAA 1997) allows either the legal personal representative of an estate or the beneficiary to apply the small business capital gains tax (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 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 considering whether to exercise his discretion, the Commissioner needs to be satisfied that there were circumstances beyond your control that prevented you from disposing of the assets within two years.
Application to your circumstances
In your case you were unable to dispose of the properties within the two year period because the terms of the will stated that the assets must be utilised for the benefit of the relative for their lifetime. A lack of movement in rural properties and drought conditions also caused a delay to the sale of the properties.
The Commissioner is able to apply an extension of time where there is a reasonable explanation for an extension.
The Commissioner has taken into consideration the circumstances, which were beyond your control, and will extend the time limit in paragraph 152-80(1)(d) of the ITAA 1997 to the settlement date of the four properties.
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