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Edited version of your written advice
Authorisation Number: 1012743611412
Ruling
Subject: Small business concessions
Question 1
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 so that the small business capital gains tax (CGT) concessions can be applied at the date of the CGT event?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2014
Year ending 30 June 2015
The scheme commences on:
1 July 2013
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
The deceased died in the 2011-12 financial year.
The deceased owned assets used in a business operated by a connected entity.
The following factors contributed to the delay in administration of the estate:
• The deceased's accountant took six month to provide a list of assets and liabilities
• It was decided that a valuation of assets would need to be conducted. This process took 12 months.
Probate was granted in the 2013-14 financial year.
A dispute arose regarding ownership of the assets.
A settlement agreement was executed in the 2014-15 financial year.
The Memorandum of Transfer and Share Transfer forms were then lodged for stamping.
The deceased would have been entitled to claim the small business concessions if the transaction had occurred prior to their death.
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 considering whether to exercise his discretion, the Commissioner needs to be satisfied that there were circumstances beyond your control that prevented you from disposing of the assets within two years.
In this case, the delay in the sale of the assets was influenced by the following key factors that are considered out of your control:
• It took six months for the tax agent to provide a list of the deceased's assets and liabilities.
• It was decided that a valuation of assets would need to be conducted. This process took 12 months.
• A dispute as to the asset ownership.
• Negotiations took place to settle various matters outstanding regarding the assets and the estate, this took X months.
It is accepted that the delay in transferring the assets were circumstances beyond your control.
Accordingly, the Commissioner will exercise his discretion under subsection 152-80(3) of the ITAA 1997 to extend the time period until the date of the CGT event.