Edited version of private advice

Authorisation Number: 1052243402731

Date of advice: 8 May 2024

Ruling

Subject: CGT - deceased estates

Question

Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the 2 year time limit in subsection 152-80(1)(d) of the ITAA 1997 by which CGT event A1 under section 104-10 of the ITAA 1997 happens in relation to the Property?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 20YY

The scheme commenced on:

28 January 20YY

Relevant facts and circumstances

The property was acquired and initially owned by the deceased who was your spouse.

The property was acquired by the deceased from their parent via inheritance in 20XX.

The deceased died on XX January 20XX and upon thier death, the property formed part of the estate of the Deceased and devolved to you.

The deceased would have been entitled to reduce or disregard a capital gain under Division 152 of the ITAA 1997 immediately prior to thier death.

You have been actively trying to sell the property following the deceased's death in 20XX.

You had discussions with potential buyers in January of 20XX and advertised the property for sale in August of 20XX.

You executed a contract of sale in September of 20XX which eventually failed on XX January 20XX after several unsuccessful extensions to settlement dates.

On XX December 20XX, your parent suffered a fall which resulted in thier hospitalisation. This required your full attention, caring for your parent until thier passing on XX January 20XX.

Further delays were a result of organising your parents funeral and estate matters.

The property is located in a rural community and has a small population, reducing the number of potential buyers.

The property was sold with the contract being executed on XX March 20XX.

You will be outside the two year time limit outlined in 152-80(1)(d) of the ITAA 1997 by one month, two weeks, and five days.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 152-80

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 beneficiary and the deceased would have been able to apply the small business 15-year exemption immediately prior to their death.

As there were several factors beyond your control which accounts for the delay in the sale of the property, these being a sales contract falling through, the property being remote, thus narrowing the pool of potential buyers and you needing to be present for the care of your parent. 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 XX March 20XX.