Edited version of private advice

Authorisation Number: 1052261103486

Date of advice: 12 June 2024

Ruling

Subject: Commissioner's discretion - deceased estate

Question 1

Will the Commissioner exercise his discretion to allow further time to reduce or disregard capital gains relating to the disposal of the property beyond the 2-year period to X April 20XX as outlined in section 152-80(3) of the Income Tax Assessment Act 1997 (ITAA1997)?

Answer

Yes.

As the process of disputing the administration of the estate accounts for the delay in the sale of the property the Commissioner will grant an extension to the period.

Question 2

Can the Administrator of the deceased estate, reduce the capital gain on the property that was used in the farming business by 50% under subdivision 115-B of the ITAA1997?

Answer

Yes.

As the deceased was a resident individual that made a discount capital gain, and that gain was made after 21 September 1999, and the property was sold more than 12 months after the acquisition, and the deceased was a resident, the discount percentage is 50%.

Question 3

Can the Administrator of the deceased estate reduce the capital gain on the property that was used in the primary production business by 50% under subdivision 152-C of the ITAA1997?

Answer

Yes.

As the Commissioner will exercise the discretion under section 152-80 of the ITAA1997, the deceased met the basic conditions for relief, the property satisfied the active asset test. As the deceased owned the property for less than 15 years, the active asset reduction in Subdivision 152-C ITAA 1997 automatically applies.

Question 4

Can the Administrator of the deceased estate reduce the capital gain on the property that was used in the primary production business by applying the small business retirement exemption as outlined in subdivision 152-D of the ITAA1997 ?

Answer

Yes.

As the deceased satisfied the basic conditions in subdivision 152-A of the ITAA 1997 and was over the age of 55 when she passed, the small business retirement exemption may be applied to reduce the capital gain by up to $500,000.

This ruling applies for the following period:

Income year ended 20XX

The scheme commenced on:

XX April 20XX

Relevant facts and circumstances

The property was acquired by the deceased's spouse X June 19XX.

The deceased acquired the Property on XX June 20XX upon the death the spouse.

The Property's market value on the death of the spouse was $X.

The Property is XX.XX hectares in size and includes a residential farmhouse.

The Property was used by the Deceased during her entire ownership period to conduct a primary production business, other than the Dwelling situated on the Property that was used as the main residence until their death.

The Deceased died on XX September 20XX.

The Executors were appointed under the Deceased's will.

The sale of the property was delayed beyond two years from the Deceased's date of death as the Executors were in dispute over the administration of the Estate.

The Supreme Court resolved the dispute by granting Letters of Administration on XX November 20XX.

The Property was promptly listed for sale by the Administrator on XX February 20XX.

The Property was sold on X April 20XX for $X. The sale settled on XX April 20XX.

The Estate had not been fully administrated by XX June 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 subdivision 115-B

Income Tax Assessment Act 1997 subdivision 152-A

Income Tax Assessment Act 1997 subdivision 152-C

Income Tax Assessment Act 1997 subdivision 152-D

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 section 152-80

Income Tax Assessment Act 1997 section 152-80(3)

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