Private ruling: Small business concessions - retirement exemption
Date of advice: 24 September 2020
Published: November 2020
Ruling period: Year ended on 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion contained in paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow you further time to choose to apply the small business retirement exemption (Subdivision 152-D) and disregard the amount in the income year ended 30 June 20XX? | A1: Yes The Commissioner will exercise his discretion under subsection 103-25(1) in your favour by allowing you to amend your 20XX tax return to make a valid choice. The beneficiaries must make a personal contribution equal to the exempt amount into a complying superannuation fund or retirement savings account and must also keep a record of the amount you choose to disregard.

Relevant facts and circumstances: The applicant is a unit trust (Unit Trust) in which there are two unit holders, Family Trust 1 and Family Trust 2. Both family trusts own 50% each. The Unit Trust made a capital gain in the income year however the Capital Gain Tax (CGT) small business concessions (the concessions) were not considered. The eligibility for the concessions was later reviewed and it was determined that the Unit Trust was eligible to claim the concessions which should have been made at the time of lodgement of the tax return. Both named beneficiaries of the separate Family Trusts were CGT concession stakeholders and were under 55 years of age at the time of lodgement of the tax return. As a consequence of the concessions not being claimed in the tax return, the net income was distributed to both Family Trust 1 and Family Trust 2 with each receiving 50% in accordance with their unit holdings. Both Family Trust 1 and Family Trust 2 then distributed the whole of its income to the respective beneficiaries.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 152-10 | Income Tax Assessment Act 1997 section 152-40 | Income Tax Assessment Act 1997 section 328-125 | Income Tax Assessment Act 1997 Subdivision 152-D