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Edited version of your written advice
Authorisation Number: 1051360954404
Date of advice: 17 April 2018
Ruling
Subject: Small business concessions – extension of time
Question
Will the Commissioner exercise the discretion in subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and extend the time limit to enable you to apply the active asset reduction and small business retirement exemption to disregard the capital gain made on the disposal of the 50% share in the property you inherited from the deceased?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 20XX
The scheme commenced on:
Relevant facts and circumstances
You and another person purchased a property as joint proprietors from which you and the other person carried on a business.
The other person passed away more than 2 years before you sold the property.
When you sold the business the purchaser entered into a lease agreement for the property which included an option to purchase.
The purchaser of the business decided not to exercise the option to purchase the property and vacated the property having found a new tenant to take over the lease.
The property was sold to the new tenant.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subdivision 152-C
Income Tax Assessment Act 1997 Subdivision 152-D
Income Tax Assessment Act 1997 section 152-80
Income Tax Assessment Act 1997 subsection 152-80(1)
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 a beneficiary to apply the small business CGT concessions in respect of the sale of the deceased’s asset in certain circumstances.
These conditions, as set out in subsection 152-80(1) of the ITAA 1997, are:
(a) the CGT asset forms part of the estate of a deceased individual, or was owned by joint tenants and one of them dies
(b) the asset passes to a beneficiary of the individual or an interest in the asset is acquired by the surviving joint tenant or tenants (as the case may be)
(c) the deceased individual would have been entitled to disregard a capital gain if a CGT event had happened in relation to the CGT asset immediately before their death, and
(d) a CGT event happens in relation to the CGT asset within 2 years of the individual’s death.
The Commissioner may extend the time limit (subsection 152-80(3) of the ITAA 1997).
In your case, as the disposal of the property did not occur within 2 years of the deceased’s death you will only be able to disregard the capital gain if the Commissioner extends the 2 year time limit for you to dispose of the 50% share in the property you inherited from the deceased.
In determining whether to allow an extended time limit the Commissioner considers the following factors:
● whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension
● whether there is any prejudice to the Commissioner if the additional time is allowed (however, the mere absence of prejudice is not enough to justify the granting of an extension)
● whether there is any unsettling of people, other than the Commissioner, or of established practices
● the need to ensure fairness to people in like positions and the wider public interest
● whether there is any mischief involved, and
● the consequences of the decision.
Having considered the relevant factors above, and the particular circumstances of your case, the Commissioner will apply the discretion in subsection 152-80(3) of the ITAA 1997 and extend the time limit.