Private ruling: Capital gains tax concessions for small business
Published: November 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 ( ITAA 1997) and allow extra time for the estate to obtain the small business capital gains tax (CGT) concessions in relation to the capital gains made on the sale of the properties purchased after 20 September 1985? | A1: Yes.

Relevant facts and circumstances: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: · the application for private ruling, · the documents provided in response to the requests for further information, · the last Will and Testament of the deceased, The partnership was established during the 199X-9Y financial year. The partners were individual A and individual B (the deceased). The partners owned a property that comprised of several titles. The deceased held both pre and post CGT interests in the property. The property consists of land which has been used continuously for a business operation. The deceased passed away in the 200X-0Y financial year. Probate was granted during the 20XX-YY financial year Individual A, passed away during the 20XX-YY financial year. There was a dispute over the ownership of the property between the Estate of individual A and the Estate of individual B. The property could not be sold or marketed for sale until the dispute was settle and the relevant parties agreed to the nature of the ownership of the land. During the relevant financial year the executors of the Estate of individual A exercised a writ which stated the property was owned by the partnership and that the property was required to be sold to wind up the partnership affairs. Further negotiations took place following the issuing of the writ and the estate jointly agreed the property could be marketed for sale. The market was sold at auction during the relevant financial year. The deceased would have been entitled to apply the small business concessions to a capital gain made on the property acquired after 20 September 1985 had they disposed of their interest just prior to their death.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 128-50(2) | Income Tax Assessment Act 1997 section 152-80 | Income Tax Assessment Act 1997 subsection 152-80(3)

Reasons for decision: Summary: When a taxpayer acquires a CGT asset, including acquisition by inheritance, they are potentially liable for tax on any capital gain on that asset when a CGT event subsequently happens to it. If a CGT asset is owned by joint tenants and one of them dies, the survivor is taken to have acquired the deceased individual's interest in the asset on the day they died under subsection 128-50(2) of the ITAA 1997 . In some instances, a taxpayer can reduce the capital gain made from a CGT event by applying the small business CGT concessions. Section 152-80 of the ITAA 1997 potentially extends the availability of the small business CGT concessions to an asset held by a legal personal representative or beneficiary of a deceased estate, to the extent that the deceased would have been entitled to the concessions, if a CGT event happens to the asset within two years of the death. 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, 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 this case, when the deceased died the property passed to the legal personal representative. As the deceased would have been able to apply the small business concessions to the land acquired after 20 September 1985, had the disposed of this land immediately prior to their death, the beneficiaries would also have access to the concessions had they disposed of the land within two years of the deceased's death. The estate will only be able to apply the small business CGT concessions if the Commissioner extends the two year time period. 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. | Detailed Reasoning - Application to your circumstances: The Commissioner is able to grant an extension of time where there is a reasonable explanation for an extension. Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 152-80(3) of the ITAA 1997 and allow an extension in relation to the land purchased after 20 September 1985.