Edited version of private advice

Authorisation Number: 1051677810677

Date of advice: 20 May 2020

Ruling

Subject: Capital gains tax and deceased estate

Question

Will the Commissioner exercise his discretion under subsection 152-80 of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time until Month X 20XX?

Answer

Yes. Having considered your circumstances and the relevant factors, the Commissioner is able to apply his discretion under subsection 152-80 of the ITAA 1997 and allow an extension of time until Month X 20XX. Further information on the relevant factors of 'death and small business CGT concessions' generally can be found on our website ato.gov.au and entering Quick Code QC52292 into the search bar at the top right of the page.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The farming property at Property X has been used for primary production since it was purchased by the deceased in 19XX.

A farming enterprise was carried out on the property consisting of pig breeding, growing out and sale of weaners and baconer, cattle farming and growing crops for fodder for the piggery operation and cattle feed.

The farming operation was carried out through a related entity, Trust X, which initially issued a number of units owned by the deceased as trustee for another Trust and another number of units held by an unrelated party.

The unrelated party sold their units to the related Trust on Month X 20XX.

An employee who came to Australia as a visa holder was employed by Trust X.

On Month X 20XX, Trust X was established with Trust X as an X% owner and the employee having an X% ownership. This entity took over the growing and selling of pigs on the property.

Trust X retained ownership of the sows, plant and equipment and continued to run cattle and grow crops.

On Month X 20XX Trust X transferred units in the Trust X to the employee.

The deceased operated and worked on the farm until they ceased work around Month X 20XX due to ill health.

The deceased passed away on Month X 20XX.

The beneficiary of the farm is Trustee X for Trust X.

The deceased's Will required the beneficiary to borrow secured funds up to enable the executor to meet the cash obligations under the Will.

The beneficiary decided to sell the farm to meet obligations under the Will.

Trust X has a contract in place with Trust X for a number of years expiring Month X 20XX for the use of the property to grow pigs.

The trustees have negotiated an earlier termination date of Month X 20XX which coincides with the expiry date of a contract Trust X had with a pig processing works.

The land had been badly rutted from ruminations of the pigs. The farm was also not considered to be viable for piggery operations due to the ongoing low market prices for pigs.

Levelling of paddocks to make the very rough surface of the land smoother was required so that the land would be suitable for general grazing or cropping. Without levelling, the property would be suitable only for a piggery or animal grazing. Cropped parts of the property comprise of only X% of the land area.

There was one potential buyer who was interested in the property and signed an exclusivity agreement on Month X 20XX to potentially acquire the property. On Month X 20XX, this potential buyer decided not to proceed with purchase of the property.

A contract of sale to sell the property was signed on Month X 20XX subject to finance approval dated Month X 20XX. Settlement date was Month X 20XX.

There was no change to the farming enterprise or structure up to and including the date of settlement.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10,

Income Tax Assessment Act 1997 section 152-80 and

Income Tax Assessment Act 1997 subsection 152-100.

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