Private ruling: CGT - small business retirement exemption
Date of advice: 8 February 2024
Published: 2 April 2024
Ruling period: Year ended 30 June 2020
Date scheme commenced: 1 July 2019

Ruling: Q1: Will the Commissioner exercise their discretion under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time for you to choose to apply the small business retirement exemption to a capital gain that arose in the 2020 income year? | A1: Yes. The general rule is that a choice available under the capital gains tax (CGT) provisions once made cannot be changed. Generally, such a choice must be made by the time you lodge your tax return or within such further time as the Commissioner allows. Due to the advice from the previous tax agent, you did not include the CGT events in your income tax return. It follows that we do not consider that you have made a choice in relation to the concessions. After taking into consideration your relevant circumstances, including the fact that no mischief is involved and there is no unsettling of other people or established practices, the Commissioner will allow an extension of time to make a choice to apply the small business retirement exemption.

Relevant facts and circumstances: You actively carried out your farming operation as partners in the parcels of farmland through a partnership. You sold the parcels of farmland. You were dealing with your financial planner at the time and were of the understanding that any small business CGT concessions would be communicated to the tax agent that was representing you at the time. However, the CGT event and their eligibility to the relevant concessions were incorrectly applied in your income tax returns on the basis you qualified for the 15-year exemption. No choice was made to claim the retirement exemption at the time the income tax returns were lodged. The annual turnover of the partnership which was used to carry out farming activities is below $2 million and is a CGT small business entity in the year of the CGT event. You satisfy the basic conditions. You were both over 55 years of age at the time of the CGT event. You have not retired from your farming activities. You have not utilised any of your retirement exemption lifetime cap of $500,000 prior to this transaction.

Relevant legislative provisions: Income Tax Assessment Act 1997 paragraph 103-25(1)(b) | Income Tax Assessment Act 1997 section 152-305