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Edited version of your written advice
Authorisation Number: 1051416283085
Date of advice: 17 August 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?
Answer
Yes
This ruling applies for the following period
Year ending 30 June 201D
The scheme commenced on
1 July 201C
Relevant facts
You and your spouse acquired a farming property after 20 September 1985. (The property)
The property was used to operate a farming business in partnership.
Your spouse passed away in 201A. (The deceased)
You continued to operate the business in partnership with the estate of your late spouse.
The property is located in an area which is subject to flooding.
The relevant State Government had proposed to compulsorily acquire the land or impose easements on the property. This effectively prevented you from selling the property until the flood issues could be resolved.
The proposals resulted in a number of formal objections from adversely impacted landowners. This caused lengthy delays and the uncertainty resulted in you being unable to sell the property.
The council decided in 201B not to proceed with the proposals.
You were then able to prepare the property for sale and proceed with a sale.
You entered into a contract for sale in 201C and settlement occurred after a period of in 201C
The deceased would have satisfied the basic conditions for the small business CGT concessions just before her 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 2 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 2 years of the deceased’s death you will only be able to disregard the capital gain made on the disposal of the interest in the land if the Commissioner extends the 2 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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