Private ruling: Capital gains tax - small business concessions - extension of time
Date of advice: 4 September 2018
Published: October 2018
Ruling period: Year ending 30 June 2018.
Date scheme commenced: 1 July 2017.

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: You are the beneficiary of the deceased’s estate. The deceased was sole owner of primary production land which comprised pre-CGT and post-CGT interests. During that time, you were also the owner pre-CGT primary production land. The deceased conducted a primary production business on the land until their passing. Following the deceased’s passing the deceased’s estate continued the primary production business for a short period of time and the stock was eventually sold off. The property continued to be used for grazing either by you or your children. You experienced extreme stress and emotional distress after the deceased’s death. You were also required to undergo a number of major operations in short period of time. You considered distributing the property to your children but thought this may not be practical or beneficial, leading you to decide to sell the property and distributing the proceeds to your children. You experienced difficulties in selling the property, however considered marketing the property to overseas parties. After some time, you received some interest from an overseas investor, however this proved unsuccessful. You also engaged a real estate agent who became involved as the overseas party wanted a real estate agent involved in the process. This process was ongoing for over one year. These negotiations fell through and the property was not sold at this stage. You had indicated to the investor that you were interested in selling the entirety of the land (pre-CGT and post-CGT interests) for a specified amount. Following the unsuccessful negotiations to sell the property you revised your asking price. Shortly after, the property was subject to severe drought conditions and it was considered that to push for a sale at this point would not achieve a realistic and fair offer for the property. You subsequently entered into an agreement with a real estate agent and a strategy was developed that once the property had received some rain and presently well, they would actively market the property, including in national newspapers, then proceed to put the property up for auction. The property was at auction after more than two years after the deceased’s 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: 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. Having considered the facts, the Commissioner will exercise his discretion under subsection 152-80(3) of the ITAA 1997 to extend the time period . | Detailed Reasoning - Further issues for you to consider: This ruling has not fully considered the deceased’s eligibility for the small business CGT concessions. You should ensure that the deceased satisfied the relevant conditions for the concessions. More information is available in the publication Capital gains tax concessions for small business , which is available on our website www.ato.gov.au .