Edited version of private advice

Authorisation Number: 1052367631127

Date of advice: 27 February 2025

Ruling

Subject: CGT - deceased estates

Question 1

Will you be eligible to claim small business relief under Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997), by applying section 152-80, in relation to the disposals of a property in the 202Z year and a property in the 202W year?

Answer 1

Yes. It is accepted that you met the requirements of sections 152-80 of the ITAA 1997 and are eligible for small business CGT relief to the extent the deceased were entitled to that relief. The Commissioner accepts the basic conditions for such relief were met, with the main issue being what constituted a reasonable estimate of aggregated turnover and whether it was under the $2 million threshold. The Commissioner accepts your estimate of aggregated turnover, where sales outside the ordinary course of business are excluded, is reasonable and is under the threshold. Therefore, you are eligible to claim small business relief under Division 152 of the ITAA 1997.

Question 2

Will the Commissioner provide an extension of time to 30 June 202Z under paragraph 103-25(1)(b) of the ITAA 1997 for you to make a choice to apply the small business 50% reduction and retirement exemption concessions in relation to disposing of the property in the income year ended 30 June 202Z?

Answer 2

Yes. After taking into consideration your relevant circumstances, including the fact that no mischief is involved, it is fair and equitable to do so and there is no unsettling of other people or established practices, the Commissioner will allow an extension of time to 30 June 202Z under paragraph 103-25(1)(b) of the ITAA 1997 for you to make a choice to apply the small business 50% reduction and retirement exemption concessions to the gain arising from the disposal.

This ruling applies for the following periods:

Financial year ended 30 June 202Z

Financial year ended 30 June 202W

Financial year ending 30 June 202Y

The scheme commenced on:

1 July 202X

Relevant facts and circumstances

You are a deceased estate that arose upon the deaths of two individuals in 202X.

At the time of their death the individuals owned interests in rural properties and operated primary production operations in two separate partnerships.

The first partnership was between the individuals (Two-Way Partnership). It operated on X properties Individual 1 owned with their parent.

The second partnership was between the individuals and another relative (Three-Way Partnership). It operated on 3 properties, 2 owned by the individuals and 1 owned by all three.

This ruling relates to the disposal of the 2 properties owned by the individuals used in the latter partnership.

Individual A estate:

After the individual's deaths, you (as the executors of Individual A's estate) and the executors of Individual B's estates) began operating these businesses (Two-Way Estate Partnership and the Three-Way Estate Partnership).

Individual B's estate:

After the individual's deaths, you (as the executors of Individual B's estate) and the executors of Individual A's estates) began operating these businesses (Two-Way Estate Partnership and the Three-Way Estate Partnership).

You disposed of one property in the year ended 30 June 202Y and one in the year ended 30 June 202Z.

During the income year ended 30 June 202Y, the Three-Way Estate Partnership disposed of a number of stock, through normal sale channels and at market value, that would not normally have been sold, had the individuals (and relative) been alive and continue to have worked the properties.

If the income from the sale of this stock is included in determining the aggregated turnover, the aggregated turnover will exceed the $2 million threshold for eligibility to small business relief.

The price of stock dropped significantly during 202Y due to dry conditions (less feed) and after the 202X prices were abnormally high.

Prior to their deaths the individuals had both used a portion of their $500,000 lifetime limit under Subdivision 152-D.

They were both over 55 years old and the net market value of their assets also exceeded $6 million at that time.

Relevant legislative provisions

Income Tax Assessment Act 1997 paragraph 103-25(1)(b)

Income Tax Assessment Act 1997 section 152-10

Income Tax Assessment Act 1997 section 152-80

Income Tax Assessment Act 1997 subsection 328-110(4)