Private ruling: CGT - SBC - extension of time to make a choice
Published: August 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Will the Commissioner allow further time under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for you to choose to apply a small business concession under Division 152 of the ITAA 1997 to a capital gain that arose in the year ended 30 June 2013? | A1: Yes.

Relevant facts and circumstances: You disposed of an active asset and realised a capital gain in the year ended 30 June 2013. You used the general CGT discount to reduce the gain by 50% as you held the asset for more than 12 months. You have lodged your tax returns for the year of the CGT event. However, due to an oversight, the existence of the capital gain was not considered. Accordingly, the original returns contain no mention of the capital gain, nor any mention of any CGT concessions. You are asking the Commissioner to exercise the discretion under 103-25(1)(b) of the ITAA 1997 to allow you the additional time to make the necessary choice to use the small business retirement exemption for the gain realised in the year ended 30 June 2013. You offer the following information in support for your eligibility to use the small business retirement exemption: • You satisfy the basic conditions of the small business concessions. • As you will both be under 55 years of age just before the choice is made, the CGT exempt amount must be contributed to a complying superannuation fund. • No contributions have yet been paid to the complying superannuation fund. • The contributions must be made by the time you make the choice.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 103-25(1) and | Income Tax Assessment Act 1997 Division 152.

Reasons for decision: Summary: 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 the income tax return is lodged, or within such further time as the Commissioner allows (subsection 103-25(1) 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. In accordance with ATO ID 2003/103 Capital Gains Tax: Choice and the small business roll-over , in this case, due to an oversight, the taxpayer did not consider any of the CGT concessions and hence did not make any choice. In your case, it is considered that an extension of time would not cause prejudice to the Commissioner, nor unsettle others or cause any unfairness to others in like positions. You have advised that the small business concessions were not considered at the time of lodging your taxation returns. Accordingly, an extension of time until dd/mm/yyyy is allowed for you to make the choice to apply a small business concession under Division 152 of the ITAA 1997.