Private ruling: Extension of time
Published: July 2014
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow further time for you to choose to apply the exemption in subsection 152-305(2) of the ITAA 1997 to a capital gain that arose in the 20XX-YY financial year? | A1: Yes.

Relevant facts and circumstances: The company owned a property. The company entered into a contract for the sale of the property in the 20XX-YY financial year. The contract of sale was subject to various special conditions. The company failed to comply with some conditions. The parties entered into a Deed of Variation in the 20YY-ZZ financial year. Settlement of the property occurred in the 20YY-ZZ financial year. The tax agent lodged the company's tax return for the year ended 30 June 20YY and was of the view that the capital gains tax event had occurred in the 20YY-ZZ financial year. The agent became aware that the gain arose in the 20XX-YY financial year when preparing the company return for the 20YY-ZZ financial year. Accordingly, the agent did not consider the potential application of the small business capital gains tax (CGT) concessions when lodging the company's income tax return for the year ended 30 June 2012.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 103-25(1)(b)

Reasons for decision: Summary: There are four CGT small business concessions available to eligible small businesses. The taxpayer, if eligible, has to choose to apply these concessions, except for the 50% active asset reduction which will automatically be applied unless the taxpayer chooses otherwise. The general rule is that a choice available under the CGT provisions once made cannot be changed. Generally, such a choice must be made by the time the income tax return is lodged, or within such further time as the Commissioner allows under paragraph 103-25(1)(b) of the ITAA 1997. A taxpayer who has considered the application of the CGT concessions and chosen a particular concession has made a choice which cannot later be changed. However, a taxpayer who did not consider the CGT concessions and accordingly included a capital gain in their income tax return has not made a choice and can, if the Commissioner allows further time, later make a choice for a CGT concession to apply and amend their return to reduce or disregard the capital gain. In determining if the Commissioner should use his discretion to allow an extension of time the following will be considered: • there should be evidence of an acceptable explanation for the period of extension requested and that it would be fair and equitable in the circumstances to provide such an extension; • account must be had to any prejudice to the Commissioner which may result from the additional time being allowed, however the mere absence of prejudice is not enough to justify the granting of an extension; • account must be had of any unsettling of people, other than the Commissioner, or of established practices; • there must be a consideration of fairness to people in like positions and the wider public interest; • whether there is any mischief involved; and • a consideration of the consequences. | Detailed Reasoning - Application to your circumstances: Having considered the circumstances and the factors outlined above the Commissioner will grant an extension of time for the company to make the choice to apply the retirement exemption.