Private ruling: CGT - small business concessions - extension of time to make a choice
Published: June 2015
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2013

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 the small business retirement exemption to a capital gain that arose in the 2013-14 financial year? | A1: Yes, an extension will be granted to 30 June 2015

Relevant facts and circumstances: You owned a property (property A). The property was acquired in 20XX jointly with your spouse for the purpose of conducting a business. You sold property A in 20XX and applied small business capital gains tax (CGT) concessions to the capital gain made on the sale. One of the small business concessions you applied was the small business rollover concession. In January 20XX you acquired another property, jointly with your spouse (property B) for the purpose of conducting a primary production business. The property consisted of a number of separate lots. You applied the rollover amount to one of the lots purchased as part of this property. You sold the lots included in property B were sold. Two of the lots were sold in the 20XX-XX financial year and the other lots were sold in the 20XX-XX financial year. The lot on which you applied the rollover concessions was sold in the 20XX-XX financial year. You prepared your own Income Tax return for the 20XX-XX year and omitted to declare any capital gain or loss on the disposal of the three lots within property B. You also omitted to declare the capital gain on CGT event J2, relating to the small business rollover applied from the disposal of property A to one of the lots making up property B.

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) | Income Tax Assessment Act 1997 subsection 152-315(4)

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: A misunderstanding and oversight by you meant that the capital gain resulting from CGT event J2 occurring at the time of the sale of the lot included in property B was not included in your 2013-14 tax return. You did not consider the relevant CGT concessions and effectively have not made a choice. 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. You have not requested a specific date for the extension period to be granted. We consider an extension of time for you to make the choice to apply the exemption to 30 June 2015 to be sufficient.