Private ruling: Extension of time to apply the capital gains tax small business concessions
Date of advice: 13 June 2019
Published: August 2019
Ruling period: Financial year ending 30 June 2020 | Financial 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 allow the small business capital gains tax (CGT) concessions to be applied? | A1: Yes. Having considered information provided and the relevant factors of the situation being ruled on, the Commissioner is able to apply his discretion under section 152-80 of the ITAA 1997 and allow an extension of time. Further information on death and the small business CGT concessions can be found on our website, ato.gov.au, by searching quick code 'QC52292'. | Q2: Will the Deceased's Estate (the Estate) be entitled to apply the small business retirement exemption in Subdivision 152-D of the ITAA 1997 to disregard the capital gain made on the sale of the Property? | A2: Yes. In this case the Deceased was over 55 years of age when they passed away and would have satisfied the basic conditions immediately prior to their passing. The Estate is eligible to reduce the gain made on the sale of the Property by applying the small business retirement exemption up to the Deceased's life time limit of $500,000. Records of the amount disregarded must be kept. Further information can be found on our website by searching for 'QC 52290'.

Relevant facts and circumstances: The Deceased inherited the Property after 20 September 1985 from their parent which they farmed for a number of years until they became ill and their farming activities ceased in 20XX. The Deceased formally entered into a lease agreement in relation to the leasing of the Property (the Lease) with the Lessee for a period of X years to end on a specified date. The Deceased passed away a number of months after the Lease had been entered into, when they were over 55 years of age. The Deceased would have qualified for the small business concessions if they had disposed of the Property immediately prior to their death as the net value of their assets were less than $6 million. Following the Deceased's passing, an informal meeting was arranged by the Trustees of the Deceased's Estate (You) with the Lessee and their relative in relation to the sale of the Property in accordance with a clause included in the Lease. You received a message prior to the proposed meeting from a legal representative of the Lessee recommending that you have a solicitor present at the planned informal meeting. After a short period a Draft Statement of Claim was received from the Lessee's legal representative commencing legal action against you, requesting a sale of the Property to them for less than market value. You engaged the services of a number of solicitors in relation to the ongoing legal action, with the Lessee initiating a number of legal actions in relation to the Property. The Lease ended, with the Lessee failing to notify you in writing within the specified period prior to the end of the first lease period in accordance with the Lease and was in breach of the Lease. As a result, you requested the Lessee to vacate the Property on the date the Lease ended. The Property was advertised for Sale by Tender a number of months after the request for the Lessee to vacate the Property, with the closing date to occur a number of weeks later. A contract for the sale of the Property was entered into prior to the closing date for an amount of $X,XXX,XXX, with settlement to occur after a number of months. A capital gain has been made on the sale of the Property.

Relevant legislative provisions: Income Tax Assessment Act Subdivision 152-A | Income Tax Assessment Act Subdivision 152-D