Private ruling: Small business capital gains tax concessions - 15-year exemption - EOT
Date of advice: 11 January 2016
Published: March 2016
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion in subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and extend the time limit to enable you to apply the small business 15-year exemption to disregard the capital gain made on the disposal of the 50% share in the property you inherited? | A1: Yes.

Relevant facts and circumstances: You and another person purchased a property from which you and the other person carried on a business. The other person passed away more than 2 years before you sold the property. The other person satisfied the relevant conditions for the small business 15-year exemption in relation to the property just prior to their death. In accordance with the terms of their will, their 50% share in the property passed to you. When you sold the business the purchaser entered into a lease agreement for the property which included an option to purchase. The purchaser of the business decided not to exercise the option to purchase the property and vacated the property having found a new tenant to take over the lease. The property was sold to the new tenant.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 152-B | Income Tax Assessment Act 1997 section 152-80 | Income Tax Assessment Act 1997 subsection 152-80(1) | Income Tax Assessment Act 1997 subsection 152-80(3)

Reasons for decision: Summary: A beneficiary of a deceased estate is entitled to disregard a capital gain arising from a capital gains tax (CGT) asset under Subdivision 152-B of the ITAA 1997 in the same way as the deceased individual would have been entitled to if certain conditions are met. These conditions, as set out in subsection 152-80(1) of the ITAA 1997, are: (a) the CGT asset forms part of the estate of a deceased individual, or was owned by joint tenants and one of them dies (b) the asset passes to a beneficiary of the individual, or an interest in the asset is acquired by the surviving joint tenant or tenants (as the case may be) (c) the deceased individual would have been entitled to disregard a capital gain under Subdivision 152-B of the ITAA 1997 if a CGT event had happened in relation to the CGT asset immediately before their death, and (d) a CGT event happens in relation to the CGT asset within 2 years of the individual's death. The Commissioner may extend the time limit (subsection 152-80(3) of the ITAA 1997). In your case, as the disposal of the property did not occur within 2 years of the other person's death you will only be able to disregard the capital gain if the Commissioner extends the 2 year time limit for you to dispose of the 50% share in the property you inherited from them. In determining whether to allow an extended time limit the Commissioner considers 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, other than the Commissioner, or of established practices • the need to ensure 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 relevant factors above, and the particular circumstances of your case, the Commissioner will apply the discretion in subsection 152-80(3) of the ITAA 1997 and extend the time limit to the date the property was sold.