Private ruling: CGT - deceased estate - Commissioner's discretion to extend the two year period
Published: August 2013
Ruling period: Financial year ended 30 June 2012.
Date scheme commenced: 1 July 2005.

Ruling: Q1: Will the Commissioner exercise the discretion under subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the two year period to 30 June 2012? | A1: No.

Relevant facts and circumstances: The deceased died in the 2003-04 financial year. The deceased's property devolved to the deceased's legal representatives, being the Trustees of the deceased's estate (you). The property was acquired by the deceased prior to 20 September 1985 as a beneficiary of another deceased estate. The property is land that was and continues to be used for primary production activities. There is no dwelling on the property and no one has resided at the property. You signed a Contract of Sale in the 2011-12 financial year to dispose of the property. You are considering accessing the 15 year small business CGT exemption which is the reason for your private ruling request for an extension of time.

Relevant legislative provisions: Income Tax Assessment Act 1997 s ubsection 104-10(3). | Income Tax Assessment Act 1997 s ubsection 104-10(5). | Income Tax Assessment Act 1997 section 128-15. | Income Tax Assessment Act 1997 Division 152. | Income Tax Assessment Act 1997 paragraph 152-10(1)(b). | Income Tax Assessment Act 1997 section 152-80. | Income Tax Assessment Act 1997 subsection 152-80(1)(c). | Income Tax Assessment Act 1997 paragraph 152-80(1)(d). | Income Tax Assessment Act 1997 subsection 152-80(3).

Reasons for decision: Summary: Under Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997), small business CGT concessions are available to reduce or disregard a capital gain providing certain conditions are satisfied. When an individual dies, section 152-80 of the ITAA 1997 allows their legal personal representative or a beneficiary of their estate to access the small business CGT concessions to the extent that the deceased would have been able to access them just before they died, provided the following conditions are met: · that the CGT asset forms part of the estate of a deceased individual · the asset devolves to the individual's legal personal representative or passes to a beneficiary of the individual · the individual would have been entitled to reduce or disregard the capital gain under Division 152 of the ITAA 1997 if a CGT event had happened in relation to the CGT asset immediately before their death, and · a CGT event happens in relation to the CGT asset within two years of the individual's death. This two year time limit may be extended by the Commissioner under subsection 152-80(3) of the ITAA 1997. Subsection 104-10(3) of the ITAA 1997 identifies that for disposal of assets (CGT event A1), the time of the CGT event is when the disposal contract is signed, not settlement. In this case, you disposed of the property in the 2011-12 financial year, when you signed the Contract of Sale. Section 128-15 of the ITAA 1997 provides that a legal personal representative, or beneficiary, is taken to have acquired an asset acquired by the deceased prior to 20 September 1985, at market value on the date of death. In your case, the property of the deceased devolved to you as the deceased's legal representatives, on the date the deceased died in the 2003-04 financial year. The deceased had acquired the property as a beneficiary of another deceased estate on prior to 20 September 1985. In this case, as the deceased acquired the property before 20 September 1985, then any capital gain made on the disposal of the property would have been disregarded under subsection 104-10(5) of the ITAA 1997. It follows, there would have been no gain as required under paragraph 152-10(1)(b) of the ITAA 1997 to which Division 152 could apply. As the individual, would not have been entitled to reduce or disregard the capital gain under Division 152 as required by paragraph 152-80(1)(c) of the ITAA 1997, section 152-80 of the ITAA 1997 does not apply. Accordingly, the Commissioner is unable to extend the two year period.