Private ruling: CGT - deceased estate, extension of time for small business concessions
Published: April 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) to extend the time limit to year ended 30 June 2012 to allow the small business capital gains tax (CGT) concessions to be applied? | A1: Yes

Relevant facts and circumstances: The deceased passed away in year ended 30 June 2009. The CGT asset (the property) is part of the deceased's estate. The property devolves to the deceased's Legal Personal Representative under the deceased's will. 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. Delays in administration of the deceased's estate were due to legal issues and investigations. Immediate marketing of the property following the deceased's death was not advised by rural real estate property sales experts. Therefore, the property was leased. In year ended 30 June 2009 a caveat was placed on the farm by the deceased's ex-partner. This ex-partner also lodged claims of dependency in relation to insurance policies of the deceased. Probate was granted in year ended 30 June 2009. Applications pursuant to the relevant legislation were made by the deceased's children and ex-spouse in year ended 30 June 2011. The estate finalised these applications in subsequent payments of compensation. A real estate sale agency agreement was signed in relation to the property in year ended 30 June 2012. A contract for sale was signed on the property in year ended 30 June 2012. Settlement occurred in 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. 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 2012 .