Edited version of private advice

Authorisation Number: 1051914976741

Date of advice: 27 October 2021

Ruling

Subject: CGT - deceased estates - small business concessions - extension of time and permanently incapacitated

Question

Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the time limit to XX Month XXXX to allow the small business capital gains tax concessions to be applied in relation to the property?

Answer

Yes. Having considered your circumstances and the relevant factors, the Commissioner will exercise the discretion under subsection 152-80(3) of the ITAA 1997 and allow an extension of time to XX Month XXXX. The ongoing dispute regarding title over a portion of the property delayed your ability to dispose of the property earlier.

Further information can be found on our website, ato.gov.au, by searching quick code 'QC52292'.

Question

Did the deceased individual satisfy the criteria under subparagraph 152-105 (d)(ii) of the ITAA 1997 in regard to being permanently incapacitated at the time of the Capital Gains Tax (CGT) event (being immediately prior to their death?

Answer

Yes. It is accepted the deceased individual would have been considered permanently incapacitated immediately prior to their death and would therefore satisfy the criteria under subparagraph 152-105 (d)(ii) of the ITAA 1997. Given the deceased passed away within XX months after being diagnosed with a terminal illness and during that time had to engage assistance to help run the business supports this finding.

This ruling applies for the following period:

Income year ended 30 June 20XX

The scheme commences on:

XX January 19XX

Relevant facts and circumstances

Your spouse acquired X% of the property in 19XX and the remainder on XX Month 19XX.

Your spouse carried on a XXXX business on the property as a sole trader from Month 19XX. From their parent's death in 19XX to Month 19XX, your spouse operated the XXXX in partnership with Their sibling.

Your spouse was diagnosed with terminal illness and died approx. XX months later at the age of XX.

During this time the deceased initiated the sale of a portion of the property to reduce debt and engaged contractors and extended family to assist with running the business due to their failing health. The contract of sale of this portion of the property was signed after your spouses' death.

You were the sole beneficiary of your spouse's will.

There had been an ongoing dispute with local council over a portion of the land that began in 19XX that resulted in an issue with the title on that portion of the property.

This dispute delayed your ability to dispose of the property.

The title issue was not resolved until Month 20XX.

You entered into as contract to sell the property within 6 months of property title dispute being resolved.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-80

Income Tax Assessment Act 1997 subparagraph 152-105(d)(ii)