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Edited version of your written advice
Authorisation Number: 1051391797966
Date of advice: 5 July 2018
Ruling
Subject: Capital gains tax - small business concession - extension of time
Question
Will the Commissioner exercise his discretion in subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the time limit to enable the small business capital gains tax (CGT) concessions to be applied to the interest in the land acquired by the deceased?
Answer
Yes
This ruling applies for the following period
Year ending 30 June 2018
The scheme commenced on
1 July 2017
Relevant facts
(‘A’) and (‘B’) acquired a property after 20 September 1985. (The property).
The property was used to operate a farming business in partnership with. (‘C’).
The property also contained a residence.
‘A’ passed away a number of years ago.
‘B’ inherited ‘A’s interest in the property.
The property continued to be used by ‘C’ personally. ‘C’ was responsible for all expenses in relation to the farming land.
‘B’ continued to reside in the residence and was responsible for the rates and insurance.
‘C’ did not enter into a lease for the use of land.
‘B’ passed away in 201X. (The deceased).
The deceased’s Will included a clause that permitted ‘C’ to continue to use the property for a period of xx years.
‘C’ decided that they no longer required use of the property and the property was placed on the market.
The property was sold in 201X.
The deceased would have satisfied the basic conditions for the small business CGT concessions just before their death.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 152-80
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 CGT concessions in respect of the sale of the deceased’s asset if certain conditions are satisfied.
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 CGT concessions in respect of the sale of the deceased’s asset in certain circumstances.
These conditions, as set out in subsection 152-80(1) of the ITAA 1997, are:
(a) the CGT asset forms part of the estate of a deceased individual, or was owned by joint tenants and one of them dies
(b) the asset devolves to the individual’s legal personal representative, passes to a beneficiary of the individual or an interest in the asset is acquired by the surviving joint tenant or tenants (as the case may be)
(c) the deceased individual would have been entitled to disregard a capital gain if a CGT event had happened in relation to the CGT asset immediately before their death, and
(d) a CGT event happens in relation to the CGT asset within two years of the individual’s death.
The Commissioner may extend the time limit (subsection 152-80(3) of the ITAA 1997).
In your case, as the disposal of the property did not occur within two years of the deceased’s death you will only be able to disregard the capital gain made on the disposal of the interests in the land acquired by the deceased in xxxx if the Commissioner extends the two year time limit.
In determining whether to exercise the discretion to extend the time limit set out in paragraph
152-80(1)(d) of the ITAA 1997, the Commissioner has considered the following factors:
● whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension,
● whether there is any prejudice to the Commissioner if the additional time is allowed, however the mere absence of prejudice is not enough to justify the granting of an extension,
● whether there is any unsettling of people, or of established practices,
● fairness to people in like positions and the wider public interest,
● whether there is any mischief involved, and
● the consequences of the decision.
Having considered the circumstances of your case and the factors outlined above, the Commissioner is able to apply his discretion in subsection 152-80(3) of the ITAA 1997 to extend the time limit.
Further issues for you to consider
This ruling has not fully considered your eligibility for the CGT small business concessions; it has only addressed eligibility under the specified provisions of the ITAA 1997. You should ensure that you satisfy all the basic conditions and other relevant conditions for eligibility. More information about the small business CGT concessions is available on the Tax Office website by searching “QC 22165”.
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