Private ruling: Capital Gain Tax
Date of advice: 27 October 2015
Published: October 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Will the Commissioner exercise his discretion in relation to the active asset test and extend the time period to XXXX? | A1: Yes.

Relevant facts and circumstances: The company acquired a property on the XXXX. The property was used to operate a business from the time the property was acquired until the business was sold on the XXXX. The property continued to be held by the company and was rented to a third party until the taxpayer sold the property on XXXX. The company has had the same Directors/Shareholders, A and B, since incorporation. The company had the intention and made steps towards selling the property prior to the above time period expiring however, there were a number of special circumstances that prevented this from occurring. A and B originally initiated the sales process of the property in XXXX when they engaged a real estate agent. The same real estate agent was engaged from XXXX until the sale of the property in XXXX. Both A and B experienced serious health conditions during the relevant time period. Their ability to make decisions and take all steps necessary to complete a sale of the above property was impaired.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 152-35 | Income Tax Assessment Act 1997 Subparagraph152-35(2)(b)(ii)

Reasons for decision: Summary: The active asset test is contained in section 152-35 of the ITAA 1997. The active asset test is satisfied if: • you have owned the asset for 15 years or less and the asset was an active asset of yours for a total of at least half of the test period detailed below, or • you have owned the asset for more than 15 years and the asset was an active asset of yours for a total of least 7.5 years during the test period. The test period: • begins when you acquired the asset, and • ends at the earlier of • the CGT event, and • when the business ceased, if the business in question ceased in the 12 months before the CGT event (under subparagraph 152-35(2)(b)(ii) of the ITAA 1997 the Commissioner can allow a longer period than 12 months). In this case, the property was an active asset up to the point the business was sold on the XXXX. The CGT event occurred when the property was sold on the XXXX. As you were unable to sell the property within 12 months of the business ceasing, the active asset test will only be satisfied if the Commissioner allows a longer period under subparagraph 152-35(b)(ii) of the ITAA 1997. In determining if the discretion to allow a period longer than 12 months should be exercised, 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; • fairness to people in like positions and the wider public interest; • whether there is any mischief involved; and • the consequences of the decision. After considering the relevant factors against your circumstances, it is considered that you have provided a reasonable and acceptable explanation for the delay in the selling the property. The Commissioner will exercise the discretion set out under section 152-35(2)(b)(ii) of the ITAA 1997 and extend the time period to XXXX. Consequently, the test period for the active asset test will end on the date the business ceased.