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Edited version of your written advice
Authorisation Number: 1051388184368
Date of advice: 24 June 2018
Ruling
Subject: Commissioner’s discretion – deceased estate – small business concessions
Question
Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the two year time limit until 30 June 2016?
Answer
Yes
This ruling applies for the following period:
1 July 2015 to 30 June 2016
The scheme commences on:
1 July 2011
Relevant facts and circumstances
The deceased died on a date in 201U.
At the time of their death, the deceased held a number of shares share in the company. The deceased’s relatives were the other shareholders.
The company owned and ran a primary production property.
The deceased originally inherited the shares on a date after 20 September 1985.
The executor appointed a legal firm to assist with the estate.
There was a dispute over the deceased’s last Will and testament that was resolved by a relevant State Court order on a date in 201V.
The estate had a number of interests in property developments held via corporate trustees and trusts.
On a date in 201V the trustee determined that the estate was insolvent.
On a date in 201V new trustees to manage the deceased bankrupt estate were approached.
On a date in 201W a new law firm was approached to assist with applying to the court to bankrupt the estate.
The petition to sequestrate the estate was not lodged with the Federal Court until a date in 201X due to the complexity of the estate.
On a date in 201X the Federal Court appointed the new trustees of the bankrupt estate.
The new trustees investigated the value of the Company shareholding. The other shareholders claimed to hold security over the deceased’s shares in the company, given in return for loans they had made to the deceased. Negotiations over the ownership of the shares continued for two years.
On a date in 201Y, the company signed a contract to sell the land for X.XX million. The contract settled on a date in 201Y.
The deceased’s shares were sold to the other shareholders of the Company on a date in 201Z for $X million, as a part of the deed of settlement that settled the claims of all parties against each other.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 106-30
Income Tax Assessment Act 1997 Section 116-30
Income Tax Assessment Act 1997 Section 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 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 two 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.
Section 106-30 of the ITAA 1997 states that in the case of a bankruptcy, the vesting of a deceased’s assets in the trustee are ignored for CGT purposes.
Application of Commissioner’s discretion in your case
In this instance we consider that you have provided a reasonable explanation for the delay in the disposal of the CGT asset. We do not consider allowing this request would cause the unsettling of others or be perceived as unfair. Accordingly, the Commissioner will exercise his discretion under subsection 152-80(3) of the ITAA 1997 to extend the time period to 30 June 2016.