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Interaction between the Small Business CGT Concessions and Deceased Estates

This article explains the interaction between the Small Business CGT Concessions and deceased estates.

Particularly, an overview of the interaction, and the extension to the Small Business CGT Concessions for deceased estates.

Overview

Following the death of an individual, whom we will refer to in this as article as the deceased, one or more of the following four things would usually happen.

  1. A CGT asset of the deceased estate may devolve to the deceased’s legal personal representative;

  2. A CGT asset of the deceased estate may pass to a beneficiary of the deceased estate;

  3. An interest in a CGT asset may be acquired by a surviving joint tenant or tenants; or

  4. A CGT asset of the deceased estate may devolve to the trustee of a testamentary trust.

In each of these scenarios, the CGT asset would now be held by an entity which we will refer to in this article as the recipient.

If the recipient were to subsequently dispose of the CGT asset, a CGT event should arise which may result in a capital gain.

Now, the recipient may be able to apply the Small Business CGT Concessions based solely on their use of the asset since they acquired it.

But, irrespective of that, an extension may apply to reduce or disregard a capital gain using the Small Business CGT Concessions in the same way as the deceased individual would have been entitled to in certain circumstances.

Extension

The extension may apply to reduce or disregard a capital gain using the Small Business CGT Concessions in the same way as the deceased individual would have been entitled to if:

  1. The deceased would have been entitled to reduce or disregard a capital gain using the Small Business CGT Concessions if a CGT event happened in relation to the CGT asset immediately before their death; and

  2. A CGT event happens in relation to the CGT asset within 2 years of the deceased’s death, or a longer period if allowed by the Commissioner.

When testing this, the requirements for the small business 15-year exemption and small business retirement exemption for individuals are modified.

The requirements for the small business 15-year exemption for individuals are modified such that, in broad terms, the requirement for the CGT event to happen in connection with the individual’s retirement is removed.

The requirements for the small business retirement exemption for individuals are modified such that, in broad terms, the requirement for an individual that is under 55 years of age to contribute an amount to a complying superannuation fund is removed.

Disclaimer – The above is intended as commentary and general information only.  It should not be relied upon as taxation advice.  Formal taxation advice should be sought for particular transactions or on matters of interest arising from the above.

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NEWS ARTICLES IN RELATION TO THE INTERACTION BETWEEN THE SMALL BUSINESS CGT CONCESSIONS AND DECEASED ESTATES