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Edited version of your written advice
Authorisation Number: 1051256341326
Date of advice: 21 July 2017
Ruling
Subject: Capital gains tax - 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 capital gains tax (CGT) concessions to be applied?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2017
The scheme commenced on:
1 July 2016
Relevant facts
The deceased passed away in 20XX. (The deceased)
You and the deceased acquired X acres of vacant land after 20 September 19YY (The property).
You and the deceased constructed your main residence on the land a short time later.
The deceased conducted a primary production business on the land until 20ZZ.
The primary production business was cattle breeding. The deceased grazed a number of cattle on the land.
The deceased was aged over 55 at the time the cattle grazing business ceased.
The land was then used for agistment purposes until the deceased passed away.
If the deceased had disposed of the land immediately prior to their death, they would have been eligible to claim the small business CGT concessions in relation to the land.
The property was located in a rural area and achieving a sale proved difficult.
The property was listed for sale in 2013 with an asking price of $XX.
You reduced the price after 12 months.
You further reduced the price in 20AA and accepted an offer, unfortunately the purchaser changed their mind and the sale did not proceed.
You listed the property for sale by auction in 20BB which was unsuccessful.
The price was further reduced.
You have listed the property with various agents and have incurred significant advertising.
You were able to dispose of the majority of the land to a neighbour in 20BB.
The sale price of the land was $XX 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 delay in the disposal of the land has been provided. We consider that continuing efforts were made to dispose of the land. 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 to the contract date.
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