Edited version of your private ruling

Authorisation Number: 1012586021932

Ruling

Subject: CGT small business concessions

Question

Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the time limit to allow the small business concessions to be applied to the disposal of the business and related assets that were held by the deceased prior to their death?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2013

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

The deceased owned and operated a business.

The deceased died unexpectedly.

X was appointed executor of the deceased's estate by Letters of Administration.

Prior to the deceased's death, the deceased was attempting to sell the business. Had the deceased successfully disposed of the business prior to their death they would have been entitled to apply the small business 50% active asset reduction and retirement exemption.

The executor continued to operate the business with a view to sell the business for the ultimate benefit of the beneficiaries. The business continued to be operated from the deceased's death until the eventual sale.

The business was actively on the market for sale at all times following the deceased's death. However, local economic conditions were unfavourable.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 152-80

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

Reasons for decision

Section 152-80 of the 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.

Specifically, the following conditions must be met:

· the asset devolves to the legal personal representative or passes to a beneficiary

· the deceased would have been able to apply the small business concessions themselves if they had disposed of the asset immediately prior to their death, and

· a CGT event happens within 2 years of the deceased's death unless the Commissioner extends the time period in accordance with subsection 152-80(3) of the ITAA 1997.

In determining whether the discretion to allow further time would be exercised, the Commissioner has considered the following factors:

· evidence of an acceptable explanation for the period of the extension requested (and whether it would be fair and equitable in the circumstances to provide such an extension)

· prejudice to the Commissioner which may result from the additional time being allowed (but the mere absence of prejudice is not enough to justify the granting of an extension)

· unsettling of people, other than the Commissioner, or of established practices

· fairness to people in like positions and the wider public interest

· whether any mischief is involved, and

· consequences of the decision.

In this case, we consider that a reasonable explanation for the delay in the disposal of the business has been provided. Unfavourable market conditions impacted the sale of the business. We consider that continuing efforts were made to dispose of the business and related assets. We do not consider that allowing this request would cause the unsettling of others or that there is any mischief involved.

Accordingly, the Commissioner will exercise his discretion under subsection 152-80(3) of the ITAA 1997 to extend the time period.