Edited version of private advice

Authorisation Number: 1052235853322

Date of advice: 3 April 2024

Ruling

Subject: Commissioner's discretion - deceased estates

Question

Will the Commissioner allow an extension of time in accordance with subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997)by 12 monthsto DDMMYY?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

4 April 20XX

Relevant facts and circumstances

The deceased passed away on DD MM 20XX. At the time of her death, the deceased owned 5 lots of farming land. The lots were first offered to family members as part of the appropriation of the estate. The estate has sold all lots except for one lot (the Property).

The Property is a parcel of vacant farming land which has been farmed as part of the dairy, cropping and beef cattle business and in the deceased's family since 19XX.

The Property has been advertised for sale for approximately XX months. In MM 20XX, the price was reduced to attract potential buyers. Since listing the Property for sale, it has received one offer which fell over due to the local council zoning the land in a flood zone.

The estate is now in the process of engaging the local council to lift the flood zone zoning and anticipates that if the zoning issue is addressed, it will improve the chances of selling the Property for a better price.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-80

Income Tax Assessment Act 1997 paragraph 152-80(1)(d)

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

Reasons for decision

Section 152-80 of the ITAA 1997 provides that where CGT event happens to an asset or interest within 2 years of individual's death, the capital gain can be reduced or disregarded in the same way that the deceased individual would have been entitled to if a CGT event had happened in relation to the CGT asset immediately before their death.

Under paragraph 152-80(1)(d) of the ITAA 1997, a CGT event must happen in relation to the CGT asset within 2 years of the individual's death. The Commissioner has the discretion to extend the time limit under subsection 152-80(3) of the ITAA 1997.

In this case, the deceased individual passed away on DD MM 20XX. The time limit expires on DD MM 20XX, being 2 years after the death of the deceased. As the relevant asset will not be sold before the time limit, the estate will only be able to reduce or disregard the capital gain if the Commissioner grants an extension of the time limit.

The Commissioner has considered the following factors in determining whether to exercise the discretion to extend the time limit set out in paragraph 152-80(1)(d) of the ITAA 1997:

• 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 grant the extension;
• whether it would be prejudicial to the Commissioner to grant further time. The absence of prejudice is not enough to justify the granting of the extension;
• whether the decision will unsettle people other than the Commissioner or unsettle established practices;
• whether it is fair to people in similar positions and the wider public interest;
• whether there is any mischief involved; and
• the consequences of granting the extension.

The delay in disposing of the deceased's CGT asset was through no fault of the estate. The estate has attempted to dispose of the Property by first offering it to family members and then listing it for sale on the open market. The Property has been advertised for sale for a long period of time and the sale price has been reduced. The estate is now attempting to improve its ability to sell the Property by engaging the local council to address zoning issues, as a previous offer fell over due to being in a flood zone. This shows that the estate intends to sell the asset and is exploring avenues to make the Property more attractive to a prospective buyer. The circumstances of the case and explanation for the delay support the case for an extension of the time limit.

There is an acceptable explanation for the extension requested and it is fair and equitable in the circumstances to grant the extension. There appears to be no prejudice to the Commissioner. The decision to grant the extension is fair to those in similar positions and the wider public interest. There does not appear to be any mischief involved and no ill consequences resulting from the extension being granted.

Having considered these factors and your circumstances, the Commissioner will exercise the discretion in subsection 152-80(3) of the ITAA 1997 to extend the time limit by 12 months.

We have limited our ruling to the question raised in your application being whether an extension of the time limit will be granted. The private ruling on whether an extension of the time limit will be granted was issued on the basis that the Commissioner did not consider the deceased's eligibility for the small business concessions.