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Edited version of private advice
Authorisation Number: 1052094726364
Date of advice: 9 March 2023
Ruling
Subject: Commissioner's discretion - deceased estate
Question
Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time to the two-year period so that the deceased estate can apply small business capital gains tax (CGT) concessions to the Property?
Answer
Yes.
After taking into consideration your relevant circumstances, including the legal complications and the impacts of COVID-19 delaying sale of the Property, the Commissioner will allow an extension of time.
This ruling applies for the following periods:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The deceased owned an interest in a farming property (the Property).
The remainder interest in the property was owned by several of the deceased's children.
The Property was originally acquired prior to 20 September 1985, by the deceased taxpayer's spouse and children.
Since its original acquisition a farming business was carried on the Property.
The deceased acquired their spouse's share in the Property upon the spouse's death.
The deceased continued carrying on the farming business in partnership until ceasing due to ill health. The deceased used the Property in the partnership farming business for a period of more than half their ownership period.
The deceased would have been entitled to reduce or disregard the capital gain on the Property had a CGT event occurred immediately before their death, for the following reasons:
(a) The Property was an active asset for a period of more than half their ownership period; and
(b) The deceased satisfied the maximum net asset value test in section 152-15 of the ITAA 1997.
After the deceased's death, the interest of the Property was re-distributed to give all the deceased's children an equal share.
The administration of the Estate was complicated by the following factors:
a) Disputes arose between the Estate and the beneficiaries due to the differing tax impact for each beneficiary, causing Court proceedings to commence against the Estate administration; and
b) COVID-19 restrictions caused delays in negotiations between the disputing parties.
The Property was recently sold.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-10
Income Tax Assessment Act 1997 section 152-15
Income Tax Assessment Act 1997 subsection 152-80