Edited version of private advice

Authorisation Number: 1052239766595

Date of advice: 29 April 2024

Ruling

Subject: Commissioner discretion - extension of time

Question

Will the Commissioner allow an extension of time in accordance with section 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to DD MM 20XX?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

DD MM 20XX

Relevant facts and circumstances

You and your late spouse acquired farmland and water entitlements (the Property) in 19XX. You operated a farming business on the Property together until MM 20XX and then leased the Property to your child.

Your spouse passed away on DD MM 20XX and you inherited thier share of the Property.

You and your late spouse have a number of children. Your child was the only one to go into the farming business and has worked on the Property for approximately 30 years. It was always your intention to transfer the Property to your child.

Within a few months of your spouse's death, you sought legal advice on transferring the Property to your child. You have been trying to finalise your family succession planning before proceeding with the transfer.

The family succession planning has been a work in progress since before your spouse passed away. The difficulty has been that there is a large pool of assets as well as trying to ensure fairness for each of your children. This process has been delayed due to a combination of factors.

You suffered a stroke in 20XX which has left you with ongoing health complications. This delayed the succession planning and it was then convoluted by your spouse's death in 20XX.

You have required frequent hospitalisation since the stroke. You then started living in an aged care facility in MM 20XX and were transferred to a higher care ward a few months later. Due to the decline in your health, the succession planning was further complicated as you needed to seek legal advice on how to move forward with the plan taking into account your capacity.

Two of your children have power of attorney for your affairs. Unfortunately, both children have faced significant health problems of their own and have undergone treatments in 20XX and 20XX.

The succession plan is approaching the final stages. You are currently preparing to move forward with the transfer of the Property to your child.

Your child is in the process of making enquiries for finance to fund the purchase. There has been some difficulty obtaining a timeline for your child's finance as thier bank is currently undergoing a takeover and is not progressing finance applications until the takeover is complete.

The transfer of the Property to your child is expected to occur by DD MM 20XX.

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 expired on DD MM 20XX, being 2 years after the death of the deceased. As the asset has not been sold before the time limit, you 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 CGT asset has been a result of a combination factors, including significant health problems faced by you, health issues faced by your children who are your attorneys, your declining capacity, the fact that you are living in aged care, and because two of your children live considerably far away. The circumstances of the case and explanation for the delay support the case for an extension of the time limit.

The request for an extension to the time limit was received approximately 7 months after the 2-year period ended. As the request has been received outside the 2-year period, there may be some prejudice on the Commissioner.

There is an acceptable explanation for the extension requested and it is fair and equitable in the circumstances to grant the extension. 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) to extend the time limit by 14 months to DD MM 20XX.

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.