Private ruling: Capital gains tax
Published: March 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

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 main residence exemption to a capital gain that arose in the 2012-13 financial year? | A1: Yes, an extension will be granted to 30 April 2015.

Relevant facts and circumstances: You purchased and settled a property several years ago. Upon settlement, you immediately moved into the property. This property was your sole residence until a point in time. At this time you moved out and began renting the property. From this time you lived in another property you owned. At the end of the 2013 financial year you signed and exchanged a contract to sell the original property. Settlement occurred after 30 June 2013. You did not intend to apply subsection 118-145(1) or (4) of the ITAA 1997 to extend the main residence exemption to the original property. You did not include a capital gain in your 2012-13 income tax return. You were not aware that capital gains tax (CGT) is based on the contract date.

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

Reasons for decision: Summary: You may choose to disregard all or part of a capital gain under the main residence exemption if you satisfy certain conditions. The general rule is that a choice available under the CGT provisions once made can not 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. 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 meant that the capital gain resulting from the sale of the property was not included in your 2012-13 income tax return. You did not intend to claim the main residence exemption in relation to this property as you were residing in another property. 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 is allowed for you to make the choice to not apply the main residence exemption.