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Edited version of your written advice
Authorisation Number: 1051227463171
Date of Advice: 19 May 2017
Ruling
Subject: Capital Gains Tax - deceased estate - extension of time
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 capital gains tax (CGT) concessions to be applied?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2015
The scheme commenced on:
1 July 2014
Relevant facts
The deceased passed away. (The deceased)
The deceased acquired a property after 20 September 1985 (The property).
The deceased conducted a business on the property until their death.
The deceased operated the business as a sole trader for a period of time.
The business was subsequently operated through a company.
The deceased was the sole director and shareholder.
If the deceased had disposed of the property immediately prior to their death, they would have been eligible to claim the small business CGT concessions in relation to the property.
The deceased was over 55.
The beneficiaries of the estate are non-residents.
The property contained a large amount of equipment which was required to be sold prior to the property being prepared for sale. The process took a longer period than expected and delayed the sale.
The property was located in an area in which sales are difficult to market.
The property was sold in 20XX and a capital gain will result from the sale.
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 a reasonable explanation for the short delay in the disposal of the property has been provided. We consider that continuing efforts were made to dispose 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.
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