Edited version of your written advice

Authorisation Number: 1012911626234

Date of advice: 20 November 2015

Ruling

Subject: Capital Gains Tax

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 property that was acquired by you?

Answer

No

This ruling applies for the following period

Year ended 30 June 2016

Year ended 30 June 2017

Year ended 30 June 2018

The scheme commences on

1 July 20XX

Relevant facts and circumstances

Your spouse passed away on the XXXX.

Your spouse died intestate and pursuant to the rules of estate administration for intestate estates, you inherited property which had been owned by your spouse.

The property consists of X hectares of land including what was, and remains, the family home.

Your spouse acquired the property in XXXX.

Your spouse rented the house from the time of acquiring the property until XXXX when they took up residence in the property.

You married your spouse in XXXX at which time you moved into the home.

Your spouse operated as a business from the time of acquisition of the property.

Additional land was acquired in XXXX adjoining the original property and was also used in your spouse business.

In XXXX, your spouse ceased operating as a sole trader, and the business operation commenced in an associated entity, the family trust.

The company is the trustee of the family trust.

Your spouse was the sole director and sole shareholder of the trustee company.

Your spouse was also the appointor of the family trust.

No distributions were made from the trust.

After your spouse' death, relatives assisted you with the business.

In the following year, your relatives further assisted with the business on behalf of the family trust.

All expenses were met by the family trust.

Due to complex set of circumstances, it took a substantial period for a Death Certificate to be issued.

Letters of administration were granted on XXXX.

The nature in which your spouse died, and the subsequent issues arising from your spouse' death, caused you considerable stress.

The home in which you lived provided continuity for you and your children during this period.

These matters concluded around XXXX, after which time, the property was distributed from the estate to you.

The final winding up of the estate affairs has only recently been completed with distribution of residual cash assets from the estate between you and your children.

The property in the name of the children continues to be administered by you as Administrator for the Estate.

In XXXX, the property was leased to your spouse's relative.

The lease of the property relieved you of the stress associated with managing the property.

You considered moving house however, given the ages of your children and considering their needs and your own needs, you were not comfortable that you would have been able to cope with a transition to a new house prior to this time.

You were unable to locate a suitable property to move to until XXXX when you purchased a block of land.

You have been in the process of constructing a house on the property during the period since acquisition of the land.

At this time it is expected that your spouse's relatives will acquire the property from you.

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, passes to a beneficiary or is acquired by a surviving joint tenant

• 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, while we appreciate the emotional distress you suffered we do not consider that you have provided a reasonable explanation for the delay in the disposal of the CGT asset. The property has never been listed for sale and will be sold to a related party. We do not consider that you made continuing efforts to dispose of the property. An extension would not be granted to other taxpayers in similar circumstances.

Accordingly, the Commissioner will not exercise his discretion under subsection 152-80(3) of the ITAA 1997 to extend the time period.