Edited version of private advice

Authorisation Number: 1051891913922

Date of advice: 4 September 2021

Ruling

Subject: CGT - small business concessions

Question

Will the Commissioner exercise discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and extend the two-year period to DD MM YYYY?

Answer

Yes. Having considered the circumstances and factors, the Commissioner will exercise discretion under subsection 152-80(3) of ITAA 1997 and extend the two-year period to DD MM YYYY. For further information on death and the CGT small business concessions visit ato.gov.au and search for 'QC 52292'.

Further Information to Consider

We rule on the question raised and the facts provided upon application. This ruling is limited to the question requesting an extension of the two-year period under subsection 152-80(3) of the ITAA 1997 and on the assumption that you are entitled to Small Business CGT Concessions under Division 152 of the ITAA 1997. The Commissioner has not considered whether you are in fact entitled to any Small Business CGT Concessions nor does this ruling address your eligibility. For further information regarding Small Business CGT Concession, visit ato.gov.au and search for 'QC 22165'.

This ruling applies for the following period periods:

DD MM YYYY

The scheme commences on:

DD MM YYYY

Relevant facts and circumstances

X and Y were in partnership, operating a business.

X and Y acquired a property as tenants in common (each obtaining 50% ownership interest) to operate the business on.

X and Y added Z to the business and each partner obtained an equal share.

X passed away. Subsequently, Z inherited Xs' share in the business whilst the beneficiaries equally inherited Xs' share in the property.

Y passed away. Subsequently, Z inherited Ys' share in the business whilst the beneficiaries equally inherited Ys' share in the property.

Both X and Ys' Wills included provisions regarding the property. These provisions provided for the ownership interest of the property to pass to the beneficiaries but with Z having rights to lease the property for a X year period (commencing X months from the date of Ys' death) and the option to purchase (which must be exercised six months prior to the end of the lease).

This provision prevented the beneficiaries from selling or taking action to sell the property prior to the expiry of the purchase option.

Z exercised the right to lease but not the option to purchase the property.

The lease and the purchase option expired, and the beneficiaries engaged a real estate agent and had the property listed for sale.

The property was sold and settlement for the sale occurred.

As required under subsection 152-80(1)(c) of the ITAA 1997, X and Y would have been entitled to reduce or disregard a capital gain if a CGT event had happened in relation to the property immediately before either of their deaths.

Under section 152-10 of the ITAA 1997, the business would have satisfied the basic conditions for relief.

Under section 152-105 of ITAA 1997, the business would have satisfied the 15-year exemption.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 152-80(3)