Private ruling: Capital Gains Tax and deceased estates
Published: June 2015
Ruling period: Year ending 30 June 2015.
Date scheme commenced: 1 July 2014.

Ruling: Q1: 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 allow the small business capital gains tax (CGT) concessions to be applied? | A1: Yes.

Relevant facts and circumstances: The deceased passed away in the 20XX financial year. A relative was named Executor and the property devolved to them. The deceased's main residence (the property) was purchased in the 19XX financial year. The deceased would have been entitled to disregard any capital gains if a CGT event occurred to the property immediately prior to their death. You submit that: • the deceased was a 'small business entity' • the value of the deceased's CGT asset and those of his connected entities and relevant affiliates was less than $6 million • the deceased owned the property for over 15 years • the property was an active asset throughout the deceased's period of ownership. The deceased had replaced the old timber house with a substantial brick house prior to their death. The property was placed on the market in the 20XX financial year. There were some enquiries but no serious offers made. The property remained on the market and the price was gradually reduced in an attempt to sell the property. Contracts were eventually exchanged in the 2014-15 financial year at a drastically reduced price. The property settled in the 2014-15 financial year.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 152-80(3).

Reasons for decision: Summary: Section 152-80 of the ITAA 1997 allows either the legal personal representative of an estate or the beneficiary to apply the small business 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 • the deceased would have been able to apply the small business concessions themselves if they had disposed of the asset immediately prior to their death, and • a CGT event happens within 2 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 the discretion to allow further time would be exercised, the Commissioner has considered the following factors: • evidence of an acceptable explanation for the period of the extension requested (and whether it would be fair and equitable in the circumstances to provide such an extension) • prejudice to the Commissioner which may result from the additional time being allowed (but the mere absence of prejudice is not enough to justify the granting of an extension) • unsettling of people, other than the Commissioner, or of established practices • fairness to people in like positions and the wider public interest • whether any mischief is involved, and • consequences of the decision. In your case, the property was listed on the open market for sale within several months of the deceased passing away, however no offers were received. The price was drastically reduced and the sale of the property eventually took place several years after the deceased passed away. It is accepted that the delay in sale of the asset were due to circumstances beyond your control. Having considered the particular circumstances of this case, the Commissioner will apply his discretion under subsection 152-80(3) of the ITAA 1997 and allow an extension to the two year time limit.