Private ruling: CGT - Deceased estate
Published: November 2014
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

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: The deceased owned two parcels of land (L1 and L2) which have passed to the legal personal representative (LPR). The LPR intends to realise the land and distribute the proceeds to the beneficiaries of the deceased's estate. However, administration of the estate is not yet complete due to the existence of conflicting wills containing different allocations of the estate's assets to the two major beneficiaries. Legal action and/or Supreme Court applications will be required to resolve the matter. It is anticipated that the matter will be resolved and the land holdings will be disposed of prior to the end of the 2014-15 financial year. The deceased met the conditions for the small business concessions 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: 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. In this case, we consider that a reasonable explanation for the delay in the disposal of the land holdings has been provided. Conflicting wills have delayed the administration of the estate. We do not consider that allowing this request would cause the unsettling of others or that there is any mischief involved. Accordingly, the Commissioner will exercise his discretion under subsection 152-80(3) of the ITAA 1997 to extend the time period to 27 May 2015 .