Private ruling: CGT - small business concessions - extension of time to make choice
Published: February 2015
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

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 to a capital gain that arose in the 20XX-XX financial year? | A1: Yes, an extension will be granted to 31 March 2015 | Q2: Will the Commissioner allow further time as provided in paragraph 103-25(1)(b) of the ITAA 1997 for you to choose to apply the small business retirement exemption to a capital gain that arose in the 20XX-XX financial year? | A2: Yes, an extension will be granted to 31 March 2015

Relevant facts and circumstances: You owned a property. The property was acquired jointly with your spouse for the purpose of conducting a primary production business. Upon the death of your spouse in 20XX, you became sole owner of the property. In 20XX you applied to subdivide the property. In May 20XX, you entered into contracts to sell the subdivided blocks of land, subject to the registration of the subdivision which occurred in October 20XX. Settlement occurred in November 20XX for both blocks of land. You lodged your 20XX-XX tax return in January 20XX without any consideration of the sales of the blocks of land or any capital gains tax (CGT) implications and the requirements of the small business CGT concessions. You believed the CGT event did not occur until date of settlement in the 20XX-XX financial year You provided the sale information to your accountant when preparing your 20XX-XX income tax return in September 20XX. You accountant obtained copies of the sale contract and established that the CGT event occurred in the 20XX-XX financial year. You were 75 years of age at the time of the CGT event and no other individuals, affiliates or entities were involved. Your aggregated turnover for the 20XX-XX financial year was nil and you satisfy the Small Business Entity test.

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

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 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. 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 the sale of the properties was not included in your 20XX-XX 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 retirement exemption to 31 March 2015 to be sufficient. | Detailed Reasoning - Additional information: In your request you have indicated that you qualify for the relevant small business CGT concessions. The Commissioner has not considered your eligibility for the small business CGT concessions in this ruling. You should ensure that you satisfy the basic conditions and any other relevant conditions. More information is available in the publication Advanced guide to capital gains tax concessions for small business 2012-13 (NAT 3359), which is available on our website www.ato.gov.au .