Private ruling: Commissioner's discretion capital gains tax-small business concessions
Date of advice: 26 February 2016
Published: April 2016

Ruling: Q1: Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for you to choose to apply or to not apply the small business active asset reduction and rollover concessions to a capital gain that arose in the XXXX-XX financial year? | A1: Yes, an extension will be granted to XXXX.


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 103-25(1) | Income Tax Assessment Act 1997 Subsection 103-25(2) | Income Tax Assessment Act 1997 Paragraph 103-25(3)(b)

Reasons for decision: Summary: You may choose to disregard or defer all or part of a capital gain under the small business CGT concessions if you satisfy certain conditions. 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 (subsection 103-25(1) of the ITAA 1997). Under subsection 103-25(2) of the ITAA 1997, the way you prepare your income tax return is sufficient evidence of the making of the choice. Paragraph 103-25(3)(b) of the ITAA 1997, however, contains an exception in relation to the small business retirement exemption, as subsection 152-315(4) of the ITAA 1997 requires the choice for this exemption to be made in writing. 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: An oversight by the entity's tax agent meant that the entity did not consider the relevant CGT concessions and effectively did not made a choice at the time of lodging its tax return. We consider this to be an acceptable explanation for the period of extension required. There would be no prejudice to the Commissioner or unsettling of people by allowing the extension. There is no mischief involved. The Commissioner considers it fair and equitable in these circumstances to exercise his discretion. An extension of time until XXXX is allowed for you to make the choice to apply the 50% active asset reduction and the small business rollover concessions.

Relevant facts: The entity made a capital gain. | The entity declared the capital gain in the relevant tax return. | At the time of preparing the entity's tax return, the entity and the tax agent who prepared the return did not consider the application of the following small business concessions: | • the rollover concession. | The entity satisfies the conditions for the small business CGT concessions. | Just before the CGT event occurred the net value of the entity's assets, including the assets of the entity's affiliated and connected entities, was less than $6 million.