Private ruling: Capital Gains Tax
Date of advice: 11 December 2015
Published: February 2016
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion under paragraph 103-25(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow further time for you to choose to apply the exemption in subsection 152-305(2) of the ITAA 1997 to a capital gain that arose in the relevant financial year? | A1: Yes.

Relevant facts and circumstances: The trust made a capital gain in XXXX. The trust was eligible for and applied the small business capital gains tax concessions, including the small business rollover. The trustee failed to find a suitable replacement asset within the two years. The trustee intended to use the small business retirement exemption to disregard $X of the capital gain by the time that the trust's XXXX return was lodged. An oversight occurred due to a change in the software and it was incorrectly noted that the superannuation contribution needed to be made as part of the XXXX return process and not the XXXX return process. The amount was not contributed to superannuation by the time that the XXXX return was lodged and this was not identified until the XXXX return work was being discussed. An amendment for the XXXX year has been prepared which declares the J5 capital gain and the amount elected for the retirement exemption and the balance of the gain to be distributed in accordance with, the resolution made by the trustee for the XXXX year.

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

Reasons for decision: Summary: There are four CGT small business concessions available to eligible small businesses. The taxpayer, if eligible, has to choose to apply these concessions, except for the 50% active asset reduction which will automatically be applied unless the taxpayer chooses otherwise. 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 under paragraph 103-25(1)(b) 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. Having considered the circumstances and the factors outlined above the Commissioner will grant an extension of time until the XXXX for the trust to make the choice to apply the retirement exemption.