Edited version of your written advice

Authorisation Number: 1051354516825

Date of advice: 28 March 2018

Ruling

Subject: Extension of time to sell an active asset

Question

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 to late 20XX?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2018

The scheme commences on:

1 July 2017

Relevant facts and circumstances

You and your spouse purchased the property in 19XX.

You operated a business in part of the property from 19XX until it was sold in 20XX.

The property included four tenancies. This included the property in question and A, B and C.

All of the shops were listed on the same title.

The property was owned jointly by you and your spouse until their death in mid 20AA.

Upon their death you acquired their interest in the property.

Your spouse had been ill for a number of years and during that time you were their primary caregiver.

In early 20BB, after your spouse’s illness, you and your spouse engaged the family real estate agent with a view to sell the property.

Discussions were cut short in the winter of 20BB when your spouse fell ill again.

From this time your focus was on caring for your spouse, this remained so until mid 20CC when they died.

Immediately following your spouse’s death you spent time recovering from the emotional and physical toll caring for your spouse and their passing took on you.

During this time you took multiple trips to visit your and your spouse’s family to assist in your recovery.

The property is in an area which has relatively low property values.

You are relying on this property to fund your retirement.

As the property was tenanted, mainly, to family members it took a considerable amount of time to get consensus about the sale of the property. You didn’t want to cause discord among your family so close to your spouse’s death.

In late 20YY you received advice from your real estate agent.

The advice that you received was that the property had to be strata titled prior to sale. The agent said this should have been done much earlier and will make the property almost impossible to sell if it isn’t strata titled.

It was also suggested that you ensure that A, B and C have current tenants prior to sale and that the property be sold as one parcel.

In late 20YY the strata title process was initiated.

In early 20XX the property was listed for sale with the real estate agent, though it was the intention to sell it at auction.

In mid 20XX the final vacant shop lease and the majority tenancy lease was signed.

The auction was postponed at this time due to the delay in the strata title.

In late 20XX the strata title process was finalised.

In late 20XX the property was auctioned and sold.

In late 20XX the property settled.

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

Commissioner’s discretion

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.

Application to your situation

In this case, we consider that a reasonable explanation for the delay in the disposal of the property has been provided. Additionally we consider that there have been continuing efforts to ensure the property be disposed of as soon as possible. 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 late 20XX.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).