Private ruling: CGT – deceased estate – small business concessions
Published: November 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

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 jointly owned a commercial property with your spouse. The property was acquired by you and your spouse prior to 1985. Your spouse passed away. Your spouse met the relevant conditions to access the small business concessions in relation to the property just prior to their death. According to the terms of your spouse’s will, their half share in the property passed to you following their death. At the time of your spouse’s death, the property was in a state of neglect and required extensive maintenance and renovations to restore it to a saleable condition. You have had various health issues which have contributed to the delay in repairing and selling the property. The property was sold under contract during the relevant financial year.

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, passes to a beneficiary or is acquired by a surviving joint tenant ● 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 you have provided a reasonable explanation for the delay in the disposal of the property. While the need to repair a property for sale would not generally be a reasonable explanation on its own, we accept that your ill health contributed to the delay. 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 .

This notice must not be taken to imply anything about: | ● the binding nature of the private advice issued to the applicant | ● the correctness of other edited versions. | Edited versions cannot be relied upon as precedent or used for determining how the ATO will apply the law in other cases.