Edited version of private advice

Authorisation Number: 1052205931553

Date of advice: 21 December 2023

Ruling

Subject: CGT - deceased estates

Question

Will the Commissioner exercise their discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997)to allow an extension of time for the executors to apply the retirement exemption to disregard the capital gain on the disposal of the interest in properties acquired by thedeceased from her spouse?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 20YY

Year ending 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

The deceased and their late spouse purchased properties pre CGT (50% interest each).

At the time of their death, the deceased had held their original 50% interest in the properties for nearly 40 years and their interest acquired by way of survivorship for just under 15 years.

After a lengthy disagreement between the beneficiaries, which lead to one of the executors resigning from their role, a resolution was reached and the decision to sell the properties was made.

Extenuating family circumstances have delayed the sale of the properties.

The properties were sold in 20YY.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-80

Reasons for decision

Section 152-80 of the Income Tax Assessment Act 1997 (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 if certain conditions are satisfied.

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 devolves to the individual's legal personal representative, 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 made on the disposal of the interest in the land if the Commissioner extends the 2 year time limit.

In determining whether to exercise the discretion to extend the time limit set out in paragraph

152-80(1)(d) of the ITAA 1997, the Commissioner has considered 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, or of established practices,

•         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 circumstances of your case and the factors outlined above, the Commissioner is able to apply his discretion in subsection 152-80(3) of the ITAA 1997 to extend the time limit.

Further issues for you to consider

This ruling has not fully considered your eligibility for the CGT small business concessions; it has only addressed eligibility under the specified provisions of the ITAA 1997. You should ensure that you satisfy all the basic conditions and other relevant conditions for eligibility. More information about the small business CGT concessions is available on the ATO website by searching "QC 22655".