Edited version of your written advice

Authorisation Number: 1013071865725

Date of advice: 15 August 2016

Ruling

Subject: Capital gains tax

Question 1

Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the two year period?

Answer

Yes.

This ruling applies for the following period:

Yeah ended 30 June 2010

The scheme commences on:

1 July 200X

Relevant facts and circumstances

The deceased died in 200X.

The deceased jointly owned and operated a primary production business on primary production land which is split over four titles.

The joint owner of the property passed away in 200X and as instructed by the will the land was to be utilised for the benefit of the deceased for their lifetime so that he/she could continue the primary production business.

The deceased operated the primary production business until their time of death.

The deceased's property transferred to the deceased's legal representatives being the Trustees of the deceased's estate (you).

After the deceased passed away you did not used the primary production land other than to house stock and plant until you were able to undertake an orderly sale of all livestock, plant and equipment and the properties themselves.

You advised the four properties were put on the market as soon as possible after the deceased's death. However due to a lack of movement in rural property you were unable to achieve settlement for all four properties within two years of the deceased's death. You also advised drought conditions in the area caused a delay in finding a buyer for the properties.

Settlement occurred for all four properties in 200X.

Three properties had contracts in place before the end of the two year time limit and settlement of two of these properties occurred within the two years since date of death.

The third and fourth property settled not long after.

You are considering accessing a small business capital gains tax concession which is the reason for your private ruling request for an extension of time.

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 Income Tax Assessment Act 1997 (ITAA 1997) allows either the legal personal representative of an estate or the beneficiary to apply the small business capital gains tax (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 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.

Application to your circumstances

In your case you have attempted to sell all four properties within two years of the deceased's death. Three out of the four properties had sale contracts in place before the two year period had expired, with settlement occurring at a later date. A lack of movement in rural properties has also caused a delay to the sale of the properties.

The Commissioner is able to apply an extension of time where there is a reasonable explanation for an extension.

The Commissioner has taken into consideration the circumstances, which were beyond your control, and will extend the time limit in paragraph 152-80(1)(d) of the ITAA 1997 to the settlement date for the two properties that did not fall within the two year exemption period.