Edited version of private advice

Authorisation Number: 1052285562749

Date of advice: 5 August 2024

Ruling

Subject: Commissioner's discretion - deceased estates

Question

Will the Commissioner exercise their discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the time limit to 30 June 2025 to dispose of the property?

Answer

Yes.

This ruling applies for the following period:

Year Ending 30 June 2025

The scheme commenced on:

1 July 2022

Relevant facts and circumstances

The deceased was in a partnership with their sibling.

They purchased the property in month 20XX as tenants in common.

They ran a livestock farming business from this property.

There is a residential house on the property.

The partnership used the property in their business the whole time the property was owned. The property satisfies the active asset test.

Just before the deceased's death, the deceased would have had a net value of CGT assets under $X million for connected entities and affiliates. The maximum net asset value test is satisfied.

The deceased passed August 20XX.

The decease's spouse is the administrator of the property.

The probate was issued May 20XX.

The deceased granted their share of the property to their spouse.

The deceased's spouse intends to sell their half of the property.

The deceased's sibling wants to keep their half of the property.

A meeting was held in September 20XX about the selling of the property.

There was no agreement reached and the matter is still ongoing.

A proposed buyer wishes to purchase the spouse's half of the property.

There is no contract in place, however they are working with an agent.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-80

Reasons for decision

Section 152-80 of the ITAA 1997 says that a CGT event happens to an asset or interest within 2 years of individual's death.

Subsection 152-80(1) of the ITAA 1997 states this section applies if:

(a) a CGT asset:

(i) forms part of the estate of a deceased individual; or

(ii) was owned by joint tenants and one of them dies; and

(b) any of the following applies:

(i) the asset devolves to the individual's legal personal representative;

(ii) the asset passes to a beneficiary of the individual;

(iii) an interest in the asset is acquired by the surviving joint tenant or tenants (as the case may be) as mentioned in section 128-50;

(iv) the asset devolves to a trustee of a trust established by the will of the individual; and

(c) the deceased individual referred to in subparagraph (a)(i) or (ii) would have been entitled to reduce or disregard a capital gain under this Division if a CGT event had happened in relation to the CGT asset immediately before his or her death; and

(d) a CGT event happens in relation to the CGT asset within 2 years of the individual's death.

Subsection 152-80(3) of the ITAA 1997 says that the Commissioner may extend the time limit in paragraph (1)(d).

In determining whether to allow an extended asset replacement period, the Commissioner considers 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, other than the Commissioner, or of established practices

•         the need to ensure fairness to people in like positions and the wider public interest

•         whether there is mischief involved, and

•         the consequences of the decision.

Application of circumstance

In this case there was a 9 month period between the deceased passing and the probate which said that the deceased's spouse receives the deceased's share of the property and partnership.

After receiving shares of the property, the deceased's spouse looked into selling it and a meeting was held with the deceased's sibling in September, but no agreement was met. As the deceased's sibling and the deceased's spouse couldn't come to an agreement the spouse has a proposed buyer who wishes to purchase their share of the property.

Accordingly, the Commissioner has considered your facts and circumstances will exercise the discretion under subsection 152-80(3) of the ITAA 1997 and extend the period for you to dispose of the property to 30 June 2025.

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