Private ruling: Extension of time to apply the small business concessions
Date of advice: 31 May 2016
Published: July 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 and allow extra time for you to apply the small business capital gains tax (CGT) concessions? | A1: Yes.

Relevant facts and circumstances: The deceased passed away during the relevant financial year. The deceased was running a primary production property at their date of death. Probate was granted during the subsequent financial year. The estate had an amount of debt that had to be repaid. Some land and other assets were sold to cover the debt. The executors distributed the remaining estate assets to the beneficiaries. You inherited the title of a property that the deceased had inherited prior to 19 September 1985. You were granted the title at the end of 20XX. Work was required to be done to the property so that it could be sold. The property is now on the market for sale. The deceased would have been entitled to apply the 15 year exemption if they had sold the property just prior to their death.

Relevant legislative provisions: 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. 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 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 the deceased would have been able to apply the small business concessions to the property had they disposed of it immediately prior to their death. Therefore, you would also have had access to the concessions had you disposed of the property within two years of their death. You will only be able to apply the small business CGT concessions if the Commissioner extends the time period in which you can dispose of the property and still be able to apply the concessions. 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. 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 to the time limit.