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Edited version of your written advice
Authorisation Number: 1013026653742
Date of advice: 1 June 2016
Ruling
Subject: CGT - small business concessions - death
Question 1
Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow extra time for the legal personal representative to obtain the small business capital gains tax (CGT) concessions under subdivision 152-D of the ITAA 1997?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
The business operated from premises.
The deceased was the director and sole shareholder of the company.
The deceased passed away in 201X.
The legal personal representative (LPR) was appointed director upon the deceased passing.
The deceased's will was challenged and subject to litigation.
Probate was granted in 201X.
The premises were used by and in the business for a period exceeding 19 years.
The basic conditions for the small business CGT concessions were met by the deceased immediately prior to their passing.
The premises satisfied the active asset test.
The premises were listed for sale, after works were carried out to prepare the property for sale.
Settlement occurred in 201X.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 152-80 and
Income Tax Assessment Act 1997 Subdivision 152-D.
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 this case, when the deceased passed away the property passed to you as a LPR. As the deceased would have been able to apply the small business concessions to the land had they disposed of the land just prior to their death, you would also have access to the concessions had you disposed of the land within two years of the deceased's passing.
You will only be able to apply the small business CGT concessions if the Commissioner extends the time period in which you can dispose of the property and still be able to apply the concessions.
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 you have provided a reasonable explanation for the delay in the disposal of the CGT asset. The deceased's will was challenged; the premises needed to be prepared for sale and the unfavourable market conditions impacted the sale of the business premises. Considering the timeframe involved, we do not consider that allowing this request would cause the unsettling of others.
Accordingly, the Commissioner will exercise his discretion under subsection 152-80(3) of the ITAA 1997 to extend the time period to the date of settlement in 201X.
The period of extension has a reasonable explanation given the circumstances, and by allowing the extension will enable you to apply the small business concessions as would have been able to be applied by the deceased just prior to their death.