Private ruling: CGT - deceased estate and extension of time to apply small business CGT concessions
Published: April 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

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 year ended 30 June 2013 to allow the small business capital gains tax (CGT) concessions to be applied? | A1: Yes

Relevant facts and circumstances: The deceased died in year ended 30 June 2011. The CGT asset (the property), is part of the deceased's estate. It has been used in a business for several decades prior to the deceased's death. You contend that the deceased would have been entitled to reduce or disregard a capital gain under Division 152 of the Income Tax Assessment Act 1997 if a CGT event involving the property had occurred prior to death. Following the deceased's death, the details in the will relating to the property were disputed and claims were made that the deceased's will was invalid. Court action continued until year ended 30 June 2013 when mediation resolved the dispute, and it was agreed that the deceased's will was valid and that an application for Probate could be made. Probate was granted in year ended 30 June 2013. The auction of the property was arranged at the earliest date following settlement of the court action and obtaining Probate. A contract for sale was signed on the property in year ended 30 June 2013. Settlement occurred in year ended 30 June 2013. The sale resulted in a capital gain. A private binding ruling is requested so the Legal Personal Representative of the deceased may apply the Small Business CGT concessions in the estate tax return for the year ended 30 June 2013.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 152-80

Reasons for decision: Summary: Section 152-80 of the Income Tax Assessment Act 1997 (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 this case, we consider that you have provided a reasonable explanation for the delay in the disposal of the CGT asset. The legal dispute regarding the validity of the deceased's will impacted the ability to apply for, and obtain, a Grant of Probate, and delayed the subsequent sale of the property. Considering the timeframe involved, we do not consider that allowing this request would cause the unsettling of others. Accordingly, the Commissioner will exercise his discretion under subsection 152-80(3) of the ITAA 1997 to extend the time period to year ended 30 June 2013 .