Private ruling: Extension of time
Date of advice: 15 January 2019
Published: May 2019
Ruling period: Income year ending 30 June 2019
Date scheme commenced: 1 July 2018

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 XX XXXX 20XX in relation to the disposal of the shares? | A1: Yes. We do not consider that allowing this request would cause the unsettling of others or that there is any mischief involved and would not be prejudicial to the Commissioner in this case nor is it unfair to other people in similar positions. Accordingly, the Commissioner will exercise his discretion under subsection 152-80(3) of the ITAA 1997 to extend the time period to XX XX XXXX to enable you to apply the small business concessions as would have been able to be applied to the deceased just prior to their death.

Relevant facts and circumstances: Prior to 20 September 1985, the Family operated a business (the Company) which was founded by Person A, which was continued by their relatives, Persons B and C. After 20 September 1985, the Company acquired a property (the Property) which was used by the Company. At the time the Property was purchased, Persons A, B and C each were equal shareholders in the Company. After a number of years, Person B passed away and their spouse inherited their shares, which they sold to Persons A and C. After many years, Person A passed away and their spouse (Person D) inherited their shares in the Company which entitled them to voting rights and dividend, income and capital distributions from the Company in accordance with their share ownership, which was more than 20%. Years later, Person D (the deceased) passed away. The maximum net value of the deceased and their connected entities and affiliates just prior to their passing away was less than $6 million. The market value of the Company’s assets that were dedicated to the carrying on of its business was more than 80% of the market value of all of the Company’s assets during the period the deceased owned the shares. The Property was used by the Company in their business from the time the deceased obtained their shares in the Company until they passed away. Under the deceased’s will, the deceased’s relatives were made the executors (the Trustees) of the deceased’s estate (you). Your entitlements arising from the Company shares were the same as the deceased’s prior to their death. Probate on the deceased’s estate was granted a number of months after the deceased passed away. During the following year, one of the beneficiaries of the deceased’s estate (Person E) initiated legal proceedings seeking a further provision under the deceased’s will, asserting rights over the Property. The review and interpretation of the deceased’s will by a solicitor was obtained due to the uncertainty of the interpretation of the will. A number of months later the matter went to mediation however it was not settled. A trial date of was set during the following year, however the matter settled shortly after the trial date during a mediation session, with the terms of settlement entered into on that date. The Settlement Arrangements of the Terms of Settlement between Person E (the Plaintiff) and You (the Defendants) which outlined that you agreed to obtain written consent from Person C for the provision that Person E had the right of first refusal in respect of the Property, and if not met within a specified period, then the Company would be at liberty to sell the Property. Person E agreed not to take any action which would in any way hinder or obstruct the Company in effecting the sale of the Property or in respect of the conduct of the Company business, nor lodge a caveat. After a short period, a letter was sent on your behalf to the legal representative of the Company and Person C seeking Person C’s written consent in relation to the settlement condition that Person E had first right of refusal on the purchase of the Property.. A number of months later, Person E lodged a caveat over the Property which was removed during the following year with a further caveat being lodged by Person E later in the year, which was later removed. Person E lodged another caveat during the following year. Person C and Person F are the current directors of the Company, with the shareholders being Person C and you, who are equal shareholders. A number of years after the deceased passed away, you and Person C have been considering the best method to realise the Property and have approached real estate agents in relation to the marketing of the Property. Numerous reports have been provided by the real estate agents in relation to the value of the Property and how it should be marketed. Until recently, Person C has not wanted to sell their ownership interest in the Company. The Property has now been sold but there have been additional delays in the liquidation process. It is anticipated that the shares will be cancelled before XX XXXX 20XX.

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 152 | Income Tax Assessment Act 1997 subsection 152-80(3)