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Edited version of your written advice
Authorisation Number: 1051238715355
Date of advice: 16 June 2017
Ruling
Subject: Small business concessions - Commissioner's discretion
Question 1
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 for the active assets to be disposed of so the small business CGT concessions can be applied?
Answer
Yes.
This ruling applies for the following periods:
The year ended 30 June 2014
The year ended 30 June 2015
The year ended 30 June 2016
The year ending 30 June 2017
The year ending 30 June 2018
The scheme commences on:
June 198X
Relevant facts and circumstances
Prior to 20 September 1985, two siblings received equal shares in farming land as a result of the death a family member.
The siblings held the land as tenants in common.
Some years after 20 September 1985, the siblings each traded their parcels of land so that each held a parcel of land each.
This resulted in one of the siblings becoming the sole owner of a specified property
Some years later, that sibling passed away.
Probate was granted on some months later.
After probate was granted, that sibling’s former spouse commenced legal proceedings in relation to assets of the estate.
During this time the estate has not been able to be administered.
The executor is planning to purchase the property from the estate.
At the time of their passing, it is assumed that the basic conditions for the small business concessions were met.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 152
Income Tax Assessment Act 1997 Section 152-80
Income Tax Assessment Act 1997 Subsection 152-80(3)
Reasons for decision
Summary
The Commissioner will exercise his discretion under subsection 152-80(3) of the ITAA 1997.
Detailed reasoning
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 delay in the disposal of the farming property has been provided. We acknowledge that the delay in the disposal of the property was as a result of the legal proceedings which were commenced after probate was granted, hampering the administration of the estate. We do not consider that allowing this request would cause the unsettling of others or that there is any mischief involved.
Further issues for you to consider
This ruling has not fully considered your eligibility for the small business CGT concessions. You should ensure that you satisfy the relevant conditions for the concessions. More information is available in the publication Capital gains tax concessions for small business, which is available on our website www.ato.gov.au.
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