Private ruling: Capital gains tax
Date of advice: 1 June 2016
Published: July 2016
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2014

Ruling: Q1: Will the Commissioner exercise the discretion under subsection 152-80(3) of the Income Tax Assessment Ac 1997 (ITAA 1997) to extend the time limit for the assets to be disposed of so that the small business capital gains tax (CGT) concessions can be applied? | A1: Yes.

Relevant facts and circumstances: The deceased owned property which was used in their business. You advise that the deceased would have been able to satisfy the basic conditions for the small business CGT concessions just prior to their death. A number of issues have delayed the sale of the property. The deceased's business was winding down prior to their passing. The deceased was also the manager of the business at the time of their death and as a result there were many administrative issues of the business which needed to be dealt with. This took a considerable period of time to address. Furthermore, the property had also been erroneously included as an asset in the accounts of an associated company. Ultimately it was discovered that the property was owned individually by the deceased, however this also took a significant period of time to address. Until these issues were dealt with, the executors of the estate were unable to deal with the property. A contract was later entered into to sell the property with settlement occurring two years of the deceased's death. The property was only ever used by the deceased for business use and the connection between the business and the property continued until its sale.

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

Reasons for decision: Summary: When an individual dies, section 152-80 of the Income Tax Assessment Act 1997 (ITAA 1997) allows their legal personal representative or a beneficiary to access the small business CGT concessions to the extent that the deceased would have been able to access them just before they died. In order to apply the concessions the CGT events must happen in relation to the CGT assets within two years of the individual's death. This time limit may be extended by the Commissioner under subsection 152-80(3) of the ITAA 1997. In determining whether to exercise the discretion to extend the time limit set out in paragraph 152-80(1)(d) of the ITAA 1997, the Commissioner has considered the following factors: • whether there is evidence of an acceptable explanation for the period of extension requested and whether it would be fair and equitable in the circumstances to provide such an extension, • whether there is any prejudice to the Commissioner if the additional time is allowed, however the mere absence of prejudice is not enough to justify the granting of an extension, • whether there is any unsettling of people, or of established practices, • fairness to people in like positions and the wider public interest, • whether there is any mischief involved, and • the consequences of the decision. Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion to extend the time limit in paragraph 152-80(1)(d) of the ITAA 1997 to cover the sale of the property.