Private ruling: CGT small business concessions - deceased estate
Published: November 2012
Ruling period: Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015
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 for Property B to be disposed of so that the small business capital gains tax (CGT) concessions can be applied? | A1: Yes | Q2: Will the Commissioner exercise his discretion under subsection 152-80(3) of the ITAA 1997 to extend the time limit for Property D, E, F and G to be disposed of so the small business CGT concessions can be applied? | A2: No

Relevant facts and circumstances: The deceased owned a number of properties that were used in a business. Immediately prior to their death, the deceased satisfied the basic conditions for the small business concessions in relation to all of the properties. Their children are the beneficiaries of the estate. Originally, it was planned to only sell two of the properties. An auction was held to sell two of the properties (Property A and Property B). Only one property was sold at this time. Property B did not sell and is still being advertised for sale. Originally two of the beneficiaries had intended to carry on the business on the remaining properties (Property C, D, E, F and G). However, it became apparent that this may no longer occur. Subsequently, these remaining properties were placed on the market. There has been minimal interest in the remaining properties for sale. Of the properties that were originally going to continue be used by the beneficiaries, only one has been sold (Property C).

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 Income Tax Assessment Act 1997 (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 or passes to a beneficiary · the deceased would have been able to apply the small business concessions themselves 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 considering whether to exercise his discretion, the Commissioner needs to be satisfied that there were circumstances beyond your control that prevented you from disposing of the assets within two years. In relation to Property B (which was originally put up for auction but did not sell), we accept that you have made continuing efforts to dispose of this property and that the negative market influences were beyond your control. Accordingly, the Commissioner will extend the time period for you to dispose of this property by two years. However, your explanation for the delay in the disposal of the remaining properties was the decision by some of the beneficiaries to not continue with their plans to use the land and the lack of market interest. We have accepted that there may be some negative market influences impacting the sale of the properties. However, in relation to these properties, we believe it was the delay in the decision by the beneficiaries to no longer use the land that has impacted on your ability to sell the properties within the required time frame. This decision was a private consideration by two of the beneficiaries and is not considered to be a circumstance beyond your control. While there is no suggestion of mischief in this case, it is likely that granting an extension of time would unsettle taxpayers in similar positions; another application with similar circumstances would be denied. Accordingly, in relation to the properties that were originally going to be used by the beneficiaries, an extension of time will not be granted.

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