Edited version of private advice

Authorisation Number: 1052242048666

Date of advice: 16 April 2024

Ruling

Subject: CGT - small business concessions and 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 extend the time limit to X February 20XX to allow the small business CGT concessions to be applied on the sale of property?

Answer

Yes.

This ruling applies for the following period:

1 July 20XX to 30 June 20XX

The scheme commenced on:

DDMMYY

Relevant facts and circumstances

The Deceased acquired the property in 19XX.

The property was used as part of a primary production business in partnership with the deceased's son and daughter in law.

The deceased held a 50% ownership share, a relative holding a X% ownership share and another relative holding a Y% ownership share.

The deceased died on X April 20XX and the partnership dissolved at the date of death of the deceased.

The estate and several Wills purportedly executed by the deceased were the subject of protracted litigation.

Letters of Administration with the Will as rectified were ultimately granted to the administrator.

The property was transferred on X February 20XX under a Deed of Family Arrangement.

Had the deceased disposed of the property prior to death, they would have been entitled to apply the 15-year exemption, enabling the capital gain to be fully disregarded.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-80(3

Reasons for decision

Section 152-80 of the ITAA 1997 allows either the legal personal representative of an estate or the beneficiary to apply the small business capital gains tax (CGT) concessions in respect of the sale of the deceased's asset in certain circumstances. Specifically, the following conditions must be met:

•       the asset devolves to the legal personal representative or passes to a beneficiary, and

•       the deceased would have been able to apply the small business concessions themselves immediately prior to their death, and

•       a CGT event happens within two years of the deceased's death unless the Commissioner extends the time period in accordance with subsection 152-80(3) of the ITAA 1997.

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 considers 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.

Application to your circumstances

In this case, the property was transferred to the executor of the estate and the deceased would have been able to apply the small business 15-year exemption immediately prior to their death.

As the Will was subject to dispute and protracted litigation which does account for the delay in the sale of the property. There is no bias to the Commissioner in allowing the extension, there is no unsettling of people or unfairness to people in like positions or the wider public. There does not appear to be any mischief involved, and it is fair and equitable to allow an extension of time. Based on these facts, it is appropriate for the Commissioner to grant an extension of time to X February 20XX.